Fannie Mae announced that it will be taking a valuation allowance against its deferred tax asset. Although the GSE said that the valuation allowance's amount has not yet been determined, it is likely to be substantially all of the value of the deferred tax asset as of Sept. 30.
The GSE is currently completing its quarterly report on Form 10-Q for the quarter ended Sept. 30. Further information concerning the amount of the valuation allowance and its effect on esults of operations in 3Q08 as well as other information such as balance sheet information, among other things, will be included in the Form 10-Q when it is filed with the Securities and Exchange Commission, Fannie Mae said in a statement.
A National Mortgage News report quoted a Credit Suisse report as saying that the GSE had $20.6 billion in deferred taxes as of June 30 and GAAP equity of $41.2 billion. "Thus the write down in deferred tax assets and AOCI [accumulated other comprehensive income] would reduce GAAP equity by half," wrote Credit Suisse analyst Moshe Orenbuch.
He added that Freddie Mac is likely to take similar action since both enterprises are in government-controlled conservatorships. "We believe that the fact that they may be run with more of a public policy motivation and less of a profit motive could have contributed to the decision to write down the deferred taxes," the Credit Suisse analyst said.