Freddie seeks first funds following $25. 3B loss
Mortgage company is asking for $13.8 billion from government

By The Associated Press

Published: November 15, 2008

WASHINGTON — Freddie Mac is asking for an initial injection of $13.8 billion in government aid after posting a massive quarterly loss.

The mortgage finance company is making the first request to tap the $200 billion promised by the Treasury Department to keep it and sibling company Fannie Mae afloat after the two were seized by federal regulators in September. Freddie Mac said it expects to receive the money by Nov. 29.

The McLean, Va.-based company posted a loss of $25.3 billion, or $19.44 per share, for the third quarter. The results compare with a loss of $1.2 billion, or $2.07 a share, in the year-ago period.

Analysts were divided about whether Fannie and Freddie’s losses would ultimately exceed the $200 billion pledge.

And that may partly depend on the extent to which Fannie and Freddie are used by the government as a tool to ease the foreclosure crisis.

"There is no way that $200 billion will be sufficient, especially as these companies are called on to, frankly, take losses … for the good of society,” said Josh Rosner, managing director of research firm Graham, Fisher & Co.

Others say it’s unlikely that losses will soar so high.

"I find it difficult to be believe that it will get that far,” said Credit Suisse interest rate strategist Ira Jersey.

Lack of confidence

Ever since the government takeover, Fannie Mae and Freddie Mac’s debt has suffered from a lack of confidence among international bond investors. They are concerned about whether the U.S. government firmly stands behind the companies’ debt.

Once the government actually injects money, that could help resolve that uncertainty, said Alex Pollock, a fellow at the American Enterprise Institute in Washington.

"It will be a demonstration to the international bond buyers of the government’s true commitment to supporting these companies,” Pollock said.

Fannie and Freddie own or guarantee about half of U.S. mortgage loans. If the companies can pay a reduced premium for their debt sales, that could translate into lower mortgage rates for consumers.

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