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GSEs Continue to Explore Financial Options

Freddie Mac's registration with the Securities and Exchange Commission is just yet another option the GSEs are trying.

By Erika Morphy | Updated on July 24, 2008

The past two weeks have been nerve-wracking for Fannie Mae, Freddie Mac and the housing market that relies on the two quasi-government agencies for financing, ending with the relatively positive development of Freddie Mac registering with the Securities and Exchange Commission – a necessary step before it can raise capital in the stock market. This upcoming week, though, is expected to provide certainty to the situation in Congress as well as with Freddie’s ultimate plans to raise more capital to shore up its financial.

Specifically, Freddie Mac has said it is exploring the possibility of raising as much as $10 billion of new capital through one or more stock offerings. On Friday it formally registered with the Securities and Exchange Commission as part of the process. Other measures Freddie Mac said it was considering including limiting growth in its portfolio, reducing the size of its portfolio, and/or lowering its quarterly dividend.

Meanwhile, the Treasury Department continues to work with Congress to hammer out details of the plan that Treasury Secretary Henry Paulson put forth last week in which the government would purchase equity stakes and extend loans, if necessary, to Fannie and Freddie . Incorporated into a larger housing bill in the House, that chamber is scheduled to vote on the measure no later than Wednesday. The Senate also expects to consider it this week as well.

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