Fannie Maelstrom

Fannie Mae ( FNM) continues to live in a house of pain -- and it can't afford the mortgage payments.

The mortgage finance giant, taken over by federal regulators more than two months ago, posted a $29 billion third-quarter loss on Monday due to a massive tax-related charge.

That's correct -- it lost $29 billion.

A company with a market cap of less than $700 million and a 65-cent stock price lost $13 a share for the July-September quarter as a result of a $21.4 billion non-cash charge to reduce the value of deferred-tax assets. Deferred-tax assets can emerge from operating losses -- an area Fannie's management knows very well -- and can be used to reduce future tax expenses.

Even after this quarter's mammoth charge, Fannie Mae says it may have to reduce the value of the remaining $4.6 billion in tax assets it has on its books.

What difference does it make? Fannie will be spending taxpayer money one way or another.

The company will likely tap the government's $100 billion lifeline early next year. Fannie Mae's net worth dropped to $9.4 billion at the end of September from $44.1 billion at the end of last year. If that number turns negative, Fannie Mae said it would have to obtain funding from the Treasury Department.

Fannie Mae said in a Securities and Exchange Commission filing that it made the accounting change and took the huge charge partly due to "the uncertainty surrounding our future business model."

So, there is a business model? This looks more like a bloodbath.

Dumb-o-meter score: 80 -- On the bright side, last year's quarterly loss of $1.4 billion doesn't look that horrible anymore, does it?

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