Guide Note

Freddie Mac is the second largest buyer and guarantor of home loans in the United States. Created in 1970, Freddie Mac is a publicly owned company that purchases mortgages which it then bundles into securities for the purpose of selling on Wall Street.

On July 14, 2008, Henry Paulson asked Congress to begin buying equity in both Fannie Mae and Freddie Mac.¹

Fast Facts²

1. Stock symbol: FRE (NYSE)
2. Annual Revenue:$43 Billion (2007)
3. Year Established: 1970
4. Phone: 703-903-2000
5. HQ: McLean, Virginia
6. President and COO: Ella Lee
7. CEO: Richard F. Syron
8. CFO: Anthony S. Piszel
9. Staff: 5,000
10. Other key people: Ralph F. Boyd Jr.
11. Industry: Mortgage Investment

Freddie Mac is a government sponsored enterprise (GSE), that was created by the United States government in 1970. It was created in order to end Fannie Mae's monopoly over the secondary mortgage industry.

Freddie Mac operates in the secondary mortgage market by purchasing mortgages from mortgage lenders. By doing so, the company assures a constant flow of new capital into the primary mortgage market. According to Freddie Mac, this additional capital lowers interest rates for mortgages by 1/2% and makes home ownership more feasible for the average buyer.

On July 11, 2008, Freddie Mac shares experienced a significant decrease in value following rumors of a potential government takeover. The stocks recovered, however, after Treasury Secretary Henry Paulson announced that the government would continue to support Freddie Mac and Fannie Mae as shareholder-owned institutions.⁴

On July 14, 2008, a rescue plan for Fannie Mae and Freddie Mac was announced by the U.S. Treasury. Under the plan, Congress would lend money to the companies, extending their credit lines, and buy shares of equity.⁵

On July 30, 2008, President George W. Bush signed a bill granting the Treasury Department the power to buy stock in or lend money to Fannie Mae and Freddie Mac. The bill tightens governmental controls over the two mortgage companies and creates a new affordable housing fund from their profits.⁶