Commentaries

Freddie Mac reports that it managed an actual net income gain in second quarter of $768 billion – a big turnaround from the $9.9 billion loss in the prior quarter. That means Treasury is off the hook, at least in this quarter, in terms of giving Freddie more money through its $200 bln equity line.

This contrasts with Fannie, which needed to take another gulp from the Treasury spigot. See more on the sinkhole here.

Freddie’s net worth got a big boost from an accounting change, one that also benefited Fannie.

Net worth at June 30, 2009 was $8.2 billion. As a result of the positive net worth, no additional funding from the U.S. Department of the Treasury was required under the terms of the Senior Preferred Stock Purchase Agreement for the second quarter. The positive net worth includes a $5.1 billion increase to total equity reflecting the April 1, 2009 adoption of FSP FAS 115-2 and FAS 124-2 relating to accounting for security impairments.

The GSE also noted that it got big boost from lower funding costs (thank you Federal Reserve for buying agency debt) and a $4.2 billion gain in its derivatives portfolio and guarantee asset (not sure what that’s referring to exactly), which were driven by mark-to-market gains due to long-term interest rates rising (sounds like swaps). But those pesky credit expenses proved to be a downer, coming in at $5.2 billion.