I read an article this morning that stated the company Fannie Mae is worth $62 Billion, I am not sure if that is tangible book value or what. They made $7 billion or so during this past quarter but are able to pay back the govt $58.7 billion next month because of a tax credit?? How can a company worth only $62 billion be able to pay back the American tax payers $58.7 billion?
How can a company worth $62 billion pay back $58.7 billion?
Am I missing something here? By tax credit of $51 billion do they actually mean that most of this payback to tax payers is through accounting on paper? Or are they actually wiring $58.7B in money to the treasury?
Here is a cut and past from their earnings new release on May 9th;
• Improvement in Fannie Mae’s financial results, the strong credit profile of the company’s new
book of business, and other factors enabled the company to release $50.6 billion valuation
allowance on deferred tax assets.
• Based on net worth of $62.4 billion at March 31, 2013, the company’s dividend obligation to
Treasury will be $59.4 billion by June 30, 2013. After the June payment, we will have paid an
aggregate of $95.0 billion in cash dividends to Treasury since conservatorship began. Senior
preferred stock outstanding and held by Treasury remained $117.1 billion at March 31, 2013, as
dividend payments do not offset prior Treasury draws.
Thanks Mr S. I took a quick look at the 10Q and it does provide the explanation. the $62 billion represents the equity position at the end of the quarter (before the dividend to the Treasury which will occur in Q2), the buik of which we would normally classify as retained earnings year-to-date. The main contribution to that "earnings" number was the $8 billion in "real" pre-tax income along with the $50 billion from the release of deferred tax asset valuation. Based on the limitation of equity that can remain in FNMA, they are creating a dividend to the Treasury of most of this amount. It appears that they will ciontinue to clear out the deferred tax asset valuation through the end of 2013 at which point it should effectively be zero. Assuming continued "real" income, we would anticipate further big dividends to the Treasury with no effective increase in the equity of FNMA itself regardless how well they perform. A cash cow for the US Treasury and apparently a dead end for actual shareholders, although with a market value of roughly $1 billion and an equity (after the vampire Treasury sucks out its several pints of blood) of around $3 to $5 billion, there would appear to be substantial liquidation value.
Can you find a reference for that figure (worth $62 billion)? FNMA actually has NEGATIVE book value of -63.86 per share (if I read Yahoo right) on a billion plus shares. Market value was roughly a billion plus a smidgen. Why it is not zero only the gods know given the mandate to forward all profit to the Treasury. Despite debt in the trillions, they were able to show a profit and had the cash on the balance sheet with which to pay the Treasury. No retained earnings for these guys.