Fannie Mae's 3Q 2012 Pretax Income was $1,813 mil, a $6,898 mil earnings improvement from the 3Q 2011 Pretax Loss of $5,085 mil.
This was a bit less than the $8,104 mil earnings improvement in the 2Q 2012 over the 2Q 2011, and also a bit less than the $8,554 mil earnings improvement in the 1Q 2012. But then, these quarterly swings are due mainly to the Provision for Credit Losses, which is subject to a great deal of uncertainty, and thus imprecision.
I think a better approach here is to focus on the first 9 Months of 2012, where Fannie Mae reported a Pretax Income of $9,650 mil, a massive $24,189 mil earnings improvement as compared with the Pretax Loss of $14,539 mil for the first 9 Months of 2011.
Of this 9 month 2012 earnings improvement of $24,189 mil, $20,204 mil of it is due to a substantially lower Provision for Credit Losses, which certainly is very good news to US taxpayers, who must cover Fannie Mae's losses, and frankly also very good news to the troubled US housing market.
I think a historical perspective on Fannie Mae's Annual Pretax Income and Pretax Losses in the past ten years would be helpful here:
2011 Pretax Loss.....$(16.9) bil
2010 Pretax Loss.....$(14.1) bil
2009 Pretax Loss.....$(73.0) bil
2008 Pretax Loss.....$(44.6) bil
2007 Pretax Loss.......$(5.1) bil
2006 Pretax Income.....$4.2 bil
2005 Pretax Income.....$7.6 bil
2004 Pretax Income.....$6.0 bil
2003 Pretax Income...$10.3 bil
2002 Pretax Income.....$4.8 bil
So 2007 through 2009, where Fannie Mae's losses were climbing each year and totaled a massive $122.7 bil for the three years combined, was a complete disaster to not just Fannie Mae, but also to US taxpayers, and also disastrous news to the US housing market.
Thus it was really good to see Fannie Mae reduce its Pretax Loss of $73.0 bil in 2009 to $14.1 bil in 2010, an incredible $58.9 bil earnings improvement in only one year.
But then this earnings improvement reversed course in 2011, where Fannie Mae's 2011 Pretax Loss of $16.9 bil, was $2.8 bil higher than the $14.1 bil Pretax Loss reported in 2010.
Thus it's fantastic news that the earnings deterioration in 2011 substantially reversed course in 2012, where in the first 9 Months of 2012, Fannie Mae has generated Pretax Income of $9.7 bil, a massive $24.2 bil profit improvement from the $14.5 bil Pretax Loss generated in the first 9 Months of 2011.
It looks to me like Fannie Mae is finally starting to get its act together, starting in 2012. I still don't like the magnitude of the continuing Derivative Losses, but some people at Fannie Mae and in the US Government should be getting some thanks from US taxpayers for this substantial earnings improvement in 2012.
