Article by David Vise and Peter Behr. Synopsis by Creative Investment Research. Copyright, 1995.
Fannie Mae, the largest financial institution (asset size) in the U.S., announced today that it would add $350 million to its charitable foundation. These funds will be used, according to Fannie Mae, to expand affordable housing and advertising efforts. The firm plans to increase spending from current levels, about $40 million, to $50 to $70 million. At the start of 1995, Creative Investment criticized Fannie Mae for not doing more to help local (Washington, D.C.) residents purchase affordable housing, given the local governments' inability to do so. Fannie's increased charitable efforts are, in our opinion, a direct response to our early 1995 criticisms.
Fannie Mae's stock closed at $125 per share, up from $73 at the start of the year. The company earned $2 billion in 1994. Fannie Mae is a U.S. government sponsored enterprise. As a government sponsored company, the firm is able to borrow money at lower than average interest rates.
We expect Fannie Mae to increase investments in minority-owned and community development financial institutions, as we suggested to the company in 1991.
