Fannie Mae-No Politics (FNMA)

[capitalismforever]

...and even then they didn't need the Gov backstop. It was FORCED on them. It was only after fraudulent Gov accounting TRICKERY utilizing DTA's that F&F appeared to require a backstop and that, days AFTER Susan McFarland, Fannie CFO, told Treasury that the DTA's were about to add 10's of BILLIONS to Fannie's bottom line further increasing their profitability. Even through all of this, Fannie still had $30 BILLION in cash reserves in the bank.

Yeah, I'm not on the bandwagon of that argument. I have too much accounting background to buy that story without research.

In 2007, this was recorded in their annual 10-k:

"We recorded net deferred tax assets of $13.0 billion and $8.5 billion as of December 31, 2007 and 2006, respectively, arising to a large extent from differences in the timing of the recognition of derivatives fair value gains and losses for financial statement and income tax purposes. We currently have not recorded a valuation allowance against our net deferred tax assets as we anticipate it is more likely than not that the results of future operations will generate sufficient taxable income to allow us to realize the entire tax benefit. If we continue to experience losses or sustained significant decreases in our earnings, we may not be able to realize all of our deferred tax assets, which would require that we establish a valuation allowance that could materially adversely affect our earnings, financial condition and capital position."

As Warren Buffett has stated several times, and I completely agree with because of the evidence, Fannie Mae was investing in things they never previously had been investing in and shouldn't have been investing in: derivatives. That's how their DTA's were created. Through bad investments in things they shouldn't have been investing in to begin with. The riskiest investments you can involve yourself in. Derivatives.

The Spittler story sounds all warm and fuzzy, and it gives investors a nice little feeling. Unfortunately, to an accountant that reads the 10-k...It's BS. The GSE's were definitely in financial trouble, which is why even today their allowance for loan losses are extraordinarily high on the assets they own compared to the assets they do not own which is 14x larger in size.