The Treasury has blocked Fannie Mae's proposed sale of nearly $3 billion in low-income housing tax credits to Goldman Sachs Group Inc. and Berkshire Hathaway Inc. after concluding that the deal would lose too much money for taxpayers.

The proposed sale would have resulted in a loss of tax revenues that would be greater than the savings to the federal government had it allowed the sale. "In short, withholding approval of the proposed sale affords more protection of the taxpayers than does providing approval," an administration official said.

Fannie Mae had agreed to sell roughly half of its $5.2 billion tax credit portfolio and had received approval to proceed with the sale from its federal regulator, the Federal Housing Finance Agency. Those credits are virtually worthless to Fannie because the company doesn't have any taxable income to offset, and it is forced to write down the value of those credits every quarter as their value declines.

Fannie had $5.2 billion in low-income-housing tax credits at the end of September, and said Thursday it has recorded $520 million in losses related to affordable-housing-tax-credit and related investments in the third quarter.

In a federal filing Thursday, Fannie said it had recorded $520 million in losses related to the low-income housing tax credit and related investments during the third quarter, and that it would be forced to record additional losses "if in the future we determine we no longer have the intent and ability to sell or otherwise transfer" those credits for value.

The blocked sale illustrates the political and policy challenges facing the government as it looks to conserve both companies' capital while balancing larger policy and political goals.

The deal pitted two government agencies against each other over how best to run Fannie and its smaller rival, Freddie Mac. The government took over both mortgage-finance companies 14 months ago through a legal procedure known as conservatorship.

A Goldman Sachs spokesman declined comment. A representative of Berkshire Hathaway couldn't immediately be reached.

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