Freddie Mac posts loss, but says federal aid not needed for now
Thursday, February 25, 2010
Freddie Mac, one of the two big mortgage finance companies taken over by the government, said Wednesday that it's still losing billions of dollars but has received enough taxpayer assistance that it doesn't need any more help for now.
The McLean-based company reported that it lost $7.8 billion ($2.39 a share) in the final three months of last year, but said that for the third consecutive quarter, it would not require another infusion of government aid. Over the past year and a half, Freddie Mac has received $51 billion in federal support.
The results came as the Obama administration put off the date when it plans to submit a specific proposal for overhauling Freddie Mac and its rival, Fannie Mae. The administration had promised it would reveal principles for reforming the companies by now.
Treasury Secretary Timothy F. Geithner told the House Budget Committee on Wednesday that the administration would not release legislation to reform the nation's housing finance system until next year. "We want to make sure that we get it right, that we do it carefully. We can't do everything right away," Geithner said.
Freddie Mac and D.C.-based Fannie Mae, caught in the mortgage market tailspin, were seized in fall 2008 as they neared collapse. Fannie Mae, which will report its financial results in coming days, has received $60 billion in aid. Both companies have been spending money to carry out the Obama administration housing recovery plans, largely by rewriting mortgage terms to make the home loans more affordable for struggling borrowers.
Freddie Mac's fourth-quarter loss was far less than what it lost a year ago, when the company reported a $23.9 billion ($7.37) loss. For all of 2009, Freddie Mac lost $25.7 billion ($7.89), compared with a $50.1 billion loss in 2008.
The gradual stabilization of the company's finances raises the prospect that while it may continue to draw on federal aid to stay afloat, it won't consume much more of the virtually unlimited pool of money the government has made available.
Several factors contributed to the company's losses in the fourth quarter, including declines in its portfolio of mortgage investments. But also weighing on the results were dividend payments the company must make to the Treasury in exchange for financial support from the government as well as a reduction in the value of tax credits Freddie had been counting as assets.
At the hearing, Geithner came under pressure from Republicans to put Fannie Mae's and Freddie Mac's debt on the government books. The companies' more-than-$5 trillion debt is all but guaranteed by the federal government, but is not counted in the U.S. national debt.
Geithner rejected the pressure. "We do not think it is necessary to consolidate the full obligations of Fannie and Freddie onto the nation's budget," Geithner said.
But Rep. Spencer Bachus (Ala.), the top Republican on the House Financial Services Committee, rejected that thinking, calling it "the same sort of financial shell game that has brought governments like Greece to a crisis point."