Fannie Mae-No Politics (FNMA)

[argos7]

I'm not following your math. At FYE 2015, FNMA earned $16bn pre tax. Are you saying that without the deferred tax asset that their provision for taxes would have been $12.2 Bn? That's an effective tax rate of 75% - I realize we're being taken to the cleaners by treasury, but that seems excessive.

I think what you're trying to say is that the *cash* amount of taxes paid will eventually increase if the deferred taxes are written down - on this we are in agreement. However, that won't impact $10bn earned per the income statement - the provision was taken, just not paid in cash, but applied against (reducing) the DTA.

What will reduce book equity and is of concern, is the potential DTA writedown. However, that occurs just once and not in perpetuity. Not trying to be overly critical and your posts are very cogent on the situation, but I think it's important to clarify that recurring earning power of FNMA is $16Bn+ on a pretax basis - regardless of what happens to the DTA.