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Report: Goldman Sachs looks to buy tax credits

Wall Street giant Goldman Sachs Group Inc. is reportedly in talks to buy tax credits from Fannie Mae, a government-controlled mortgage financier.
/ Source: The Associated Press

Wall Street giant Goldman Sachs Group Inc. is reportedly in talks to buy tax credits from Fannie Mae, a government-controlled mortgage financier.

The Wall Street Journal reported Monday the credits, tied to incentives to boost investments in low-income housing, would allow Goldman to lower its tax bill.

A spokesman for Goldman Sachs declined to comment on the report. Its shares rose $1.46 to $171.63 in premarket trading, while Fannie Mae shares were stead ay $1.08.

Goldman has quickly recovered from the peak of the credit crisis last fall and is again reporting multibillion dollar quarterly profits. The New York-based investment bank earned $3.03 billion during the third quarter.

Goldman has been under the microscope for its resilience as stock and credit markets bounce back faster than the consumer banking sector and the broader economy.

It received $10 billion in government aid last fall and changed its regulatory status to access government funding. It quickly repaid the $10 billion this year as its profits bounced back.

Fannie Mae, which was taken over by the government last fall at the peak of the credit crisis, is still in a dire situation. It continues to need funding from the government and its operations are closely monitored by its regulator, the Federal Housing Finance Agency.

Because Fannie Mae continues to lose money, it has been unable to take advantage of the credits to reduce its tax burden.

Selling the credits would enable Fannie Mae to pocket some much-needed cash and reduce the amount it has to borrow from the Treasury Department, the Journal reported. It could also provide Fannie Mae with fresh resources to finance more mortgages, according to the report.

Fannie Mae and fellow mortgage giant Freddie Mac were taken over by the government last fall and the pair own or back most mortgages in the U.S. As the housing market collapsed and mortgage defaults skyrocketed, the companies faced billions of dollars in losses and were unable to remain afloat without major government support.