But if you study Fannie Mae’s 10Q report, you’ll find that most of the 2013:Q1 reported profit came from Fannie’s decision to recredit itself with $50.6 B in deferred-tax assets. The company’s theory prior to 2008 was that, with all its previous losses, it wouldn’t have to pay much future taxes as a result of carrying those losses forward. Fannie had been counting the taxes it wouldn’t have to pay in the future as one of its main net assets in 2008. When Fannie was taken into conservatorship in 2008, there was a decision that maybe the enterprise would never go back to being a “private” company that owed any taxes, so those deferred-tax assets were written off as a big loss. Now the enterprise is putting them back on the books, as a result of which it claimed a huge after-tax profit for 2013:Q1. So Fannie plans to pay the U.S. Treasury (the GSE’s current owner) a big dividend.
It’s pretty amusing to see how this is getting covered by some of the press. For example, CNN’s headline was Fannie Mae, Freddie Mac to help cut deficit:
U.S. taxpayers will soon reap a nearly $67 billion benefit from the recovering housing market, which will help to shrink deficits and delay the need to raise the country’s debt ceiling.
To translate, you don’t need to worry so much about the outstanding government debt because maybe some day Fannie is going to be a private company again that won’t have to pay taxes for quite a while. Because the taxes that Fannie isn’t going to pay in the future count as an asset to its current owner (the U.S. government), we can now declare ourselves to be better off financially than we were a week ago.
Charts at the link.