Treasury Gives Freddie Cash Infusion

The Treasury Department has provided Freddie Mac with a $13.8 billion infusion to wipe out a capital deficit and keep the government sponsored enterprise afloat. In exchange for this infusion, the mortgage giant issued $13.8 billion in senior preferred stock to Treasury. Freddie reported a $25.3 billion loss for the third quarter and a $13.8 billion capital deficit, which triggered Treasury's response. Treasury officials pledged to prevent Freddie and Fannie Mae from operating with negative net worth when the GSEs where placed in conservatorships on Sept. 7. Under separate senior preferred stock purchase agreements, Treasury agreed to provide Freddie and Fannie each with up to $100 billion in net worth assistance. Fannie reported a $29 billion loss in the third quarter and revealed its net worth had dropped to $9.4 billion as of Sept. 30. The Fannie executives warned in their quarterly securities filing that the GSE may have negative net worth by the end of the fourth quarter if "housing and financial market trends continue to worsen and we have a significant loss in the fourth quarter of 2008."