The Wall Street Journal’s John Carney writes that mortgage giants Fannie Mae and Freddie Mac can’t be recapitalized because they do not have the consistent earnings power to do so.

According to The Wall Street Journal, Freddie Mac lost $475 million in the third quarter and has earned $4.5 billion in the past four quarters – an average net income of around $1.1 billion. Fannie Mae earned $1.96 billion in the third quarter and an average of $2.45 billion in the past four quarters.

"Currently, both companies are required to pay any profits plus a share of their existing capital reserve to the U.S. Treasury each quarter, an arrangement known as a “net-worth sweep.” What the quarterly results make clear is that even if the original 10% dividend were restored, neither company could recapitalize itself with accumulated earnings," Carney reported.

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