The most recent earnings report follows three straight quarters in which the McLean-based company did not need infusions from the Treasury. Still, the firm is struggling to recover from the mortgage-market meltdown; it reported a net loss of $6.7 billion in the first quarter of 2010, compared with a loss of $9.9 billion a year ago.
Freddie Mac is turning to the Treasury again mostly because of a change in accounting. Revised rules that took effect this year require companies such as Freddie to move all mortgages they guarantee — but don’t own — onto their books. This shift alone caused the company’s equity to drop by $11.7 billion, helping to plunge its net worth into the red.
Under the terms of Freddie’s September 2008 bailout, taxpayers make up the shortfall in any quarter when the firm’s net worth is negative. The accounting change, along with the firm’s loss and a $1.3 billion dividend payment to the Treasury, pushed Freddie’s net worth to a negative $10.5 billion, down from a positive $4.4 billion last year.
Freddie’s quarterly report triggered renewed calls from some lawmakers to reform the company and its larger sister, District-based Fannie Mae. These government-sponsored enterprises, or GSEs, contributed to the financial crisis but are not addressed in the regulatory overhaul legislation now before the Senate.
“Without real GSE reform, the bailout of Fannie and Freddie will not stop, taxpayers will be forced to continue to dump hundreds of billions of dollars into the companies, and Fannie and Freddie will continue business as usual,” said Rep. Spencer Bachus (Ala.), ranking Republican on the House Financial Services Committee, in a statement released after Freddie’s earnings. Obama administration officials have said reform on that issue is more likely to come next year.