The Treasury Department has turned down Fannie Mae's request to sell roughly $2.6 billion in low-income housing tax credits (LIHTCs) to Goldman Sachs. The denial letter came late in the day Friday.

The Federal Housing Finance Agency had cleared Fannie to sell the LIHTCs but the ultimate decision rested with Treasury. (Berkshire Hathaway had also expressed an interest in buying the tax credits.) In a filing with the Securities and Exchange Commission Fannie — without mentioning Goldman — Fannie said it had an offer to sell the credits for "a price that exceeds their current carrying value."

According to combined press reports, Treasury nixed the sale because it was not in the best interests of tax payers. Over the past five quarters, Fannie has lost $85 billion.

Goldman could have used the LIHTCs to reduce its tax burden to the government.

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