Fannie Mae-No Politics (FNMA)

[bcde]

"What happens once senior preferred is considered paid off and lower DTA because of tax rate goes down from 35% to 25%? "

MannSinger,
In terms of accounting entries it will be difficult to understand for many.

It will be best understood in terms of net worth or capital reserves =(assets - liabilities - Shareholder funds).

1. If SPS is paid off due to revocation of NWS retroactively then net worth goes up by $187.5B.

Net worth = 0 + $187.5B = $187.5B

2. If DTA reserves lose value because of lower tax rates, then net worth goes down by $21B ( tax rate 20 percent from 35 percent).

Networth = $187.5B - $21B = $166.5B

It is as simple as this.

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Fannie, Freddie may write down $21 billion due to U.S. tax cut: BMO
http://www.reuters.com/article/us-fanniemae-tax/fannie-freddie-may-write-down-21-billion-due-to-u-s-tax-cut-bmo-idUSKBN1722O6