<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>Freddie Mac needs $21b govt aid after record 3Q loss
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<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->WASHINGTON: Freddie Mac, seized by the US government in September, asked the Treasury for US$13.8 billion (S$20.9 billion) after a record quarterly loss caused its net worth to fall below zero.
The third-quarter net loss widened to US$25.3 billion, or US$19.44 a share, after writing down tax assets and providing for bad mortgages and securities, Freddie said in a regulatory filing yesterday.
The losses forced Freddie to request government funds and the company expects to receive the money by Nov 29.
Freddie's demand adds to the US government's growing burden as it tries to prevent a collapse in financial markets.
Fannie Mae, also placed under government control, said it may need funds at the end of the year. It warned that the US$100 billion earmarked by the government may not be enough.
'You could very well get losses north of US$100 billion on both of these companies,' said an analyst at Friedman, Billings, Ramsey Group in Virginia.
Freddie chief executive officer David Moffett, named in September when the government seized control, increased writedowns for bad mortgages and securities and took a charge against most of Freddie's so-called deferred tax credits.
Fannie CEO Herbert Allison took similar steps, causing the Washington-based company to record a US$29 billion loss.
Freddie's net worth stood at a negative US$13.7 billion at the end of the quarter. The company wrote down its deferred tax assets by US$14.3 billion, leaving US$11.9 billion. Companies build up tax credits as losses grow, keeping them as assets so they can be used when profits return.
Fannie and Freddie will have to pay the Treasury a 10 per cent annual dividend if they access the federal funding.
The cost, paid out if the companies are profitable, will drag down earnings even if the housing market eventually turns around, Mr Rajiv Setia, a fixed-income strategist at Barclays Capital in New York, said. 'Once you have US$50 billion in preferred outstanding at a 10 per cent rate, it leaves virtually nothing for common shareholders,' said Mr Setia, who estimates the cost at US$5 billion a year.
Shareholders were all but wiped out after Freddie's losses prompted the government to place the company into conservatorship on Sept 6. The stock, which traded above US$47 a year ago, dropped to 73 US cents on Thursday.
Fannie and Freddie own or guarantee at least 40 per cent of the US$12 trillion in US residential mortgage debt outstanding. BLOOMBERG
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<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->WASHINGTON: Freddie Mac, seized by the US government in September, asked the Treasury for US$13.8 billion (S$20.9 billion) after a record quarterly loss caused its net worth to fall below zero.
The third-quarter net loss widened to US$25.3 billion, or US$19.44 a share, after writing down tax assets and providing for bad mortgages and securities, Freddie said in a regulatory filing yesterday.
The losses forced Freddie to request government funds and the company expects to receive the money by Nov 29.
Freddie's demand adds to the US government's growing burden as it tries to prevent a collapse in financial markets.
Fannie Mae, also placed under government control, said it may need funds at the end of the year. It warned that the US$100 billion earmarked by the government may not be enough.
'You could very well get losses north of US$100 billion on both of these companies,' said an analyst at Friedman, Billings, Ramsey Group in Virginia.
Freddie chief executive officer David Moffett, named in September when the government seized control, increased writedowns for bad mortgages and securities and took a charge against most of Freddie's so-called deferred tax credits.
Fannie CEO Herbert Allison took similar steps, causing the Washington-based company to record a US$29 billion loss.
Freddie's net worth stood at a negative US$13.7 billion at the end of the quarter. The company wrote down its deferred tax assets by US$14.3 billion, leaving US$11.9 billion. Companies build up tax credits as losses grow, keeping them as assets so they can be used when profits return.
Fannie and Freddie will have to pay the Treasury a 10 per cent annual dividend if they access the federal funding.
The cost, paid out if the companies are profitable, will drag down earnings even if the housing market eventually turns around, Mr Rajiv Setia, a fixed-income strategist at Barclays Capital in New York, said. 'Once you have US$50 billion in preferred outstanding at a 10 per cent rate, it leaves virtually nothing for common shareholders,' said Mr Setia, who estimates the cost at US$5 billion a year.
Shareholders were all but wiped out after Freddie's losses prompted the government to place the company into conservatorship on Sept 6. The stock, which traded above US$47 a year ago, dropped to 73 US cents on Thursday.
Fannie and Freddie own or guarantee at least 40 per cent of the US$12 trillion in US residential mortgage debt outstanding. BLOOMBERG
