Fannie Mae to Reduce Value of Deferred Tax Assets (Update1) By Dawn Kopecki and Jody Shenn
Oct. 29 (Bloomberg) -- Fannie Mae will write down about $20 billion of assets after being seized by the government last month, eroding its capital and increasing the likelihood the U.S. Treasury may need to inject cash into the mortgage giant. The company will ``take a valuation allowance'' that is ``likely to be substantially all of the value of its deferred tax assets'' as of Sept. 30, Fannie Mae said today in a statement. Fannie Mae's $20.6 billion of deferred-tax assets as of June 30 accounted for almost half its $47 billion in regulatory capital, according to company filings. Fannie and Freddie Mac, the two largest mortgage finance providers, were placed into conservatorship last month as the worst housing slump since the Great Depression sparked a surge in delinquencies and eroded their capital. Reducing the value of deferred tax assets would cut into Fannie's shareholder equity and capital, potentially increasing the need for the U.S. Treasury to use some of the $200 billion it set aside to bail out Fannie and Freddie. The potential writedown signals Chief Executive Officer Herbert Allison is cleaning the slate after taking over the company as part of the government's seizure. Deferred-tax assets are created by previous losses and can be carried forward and applied against future earnings to lower or eliminate a company's tax bills. Accounting rules require a company to assess whether it can use the tax asset based on issues such as historical and projected profitability. If future earnings are in doubt, a company must consider reducing the value of the asset. Fannie Mae and Freddie Mac had a combined net loss of $14.9 billion in the last four quarters as prices for houses tumbled and homeowners defaulted on their mortgages. To contact the reporter on this story: Dawn Kopecki in Washington at [EMAIL PROTECTED]; Jody Shenn in New York at [EMAIL PROTECTED] Last Updated: October 29, 2008 09:39 EDT --~--~---------~--~----~------------~-------~--~----~ Thanks for being part of "PoliticalForum" at Google Groups. For options & help see http://groups.google.com/group/PoliticalForum * Visit our other community at http://www.PoliticalForum.com/ * It's active and moderated. Register and vote in our polls. * Read the latest breaking news, and more. -~----------~----~----~----~------~----~------~--~---
