Freddie Mac (NYSE: FRE)

As if it couldn’t get any worse for Freddie Mac. The government-sponsored mortgage lender released their earning report today. Freddie reported a net loss of $821 million, or $1.63 per share, compared to a net profit of $729 million, or 96 cents per share, in the year-ago period. Analysts expected a loss of 41 cents a share, on average, according to Thomson Reuters. The most recent loss comes on top of a first-quarter dent of $151 million, or 66 cents per share. That is three times worse than what the street had expected as the bad housing market weighed down the stocks. To make matters Chairman and CEO Richard Syron stated that the dividends will be cut by 80% or more on the common shares.
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This comes weeks after the Federal Reserve said that they will do what’s necessary to save the mortgage lender, as I stated in a recent post on the Federal Reserve. I guess they have their work cut out for them. The fed will have to just give them some more of our tax dollars to save them from their own mistakes.
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Celent Senior Analyst Walter O’Haire says it “will be interesting to see are the terms investors will demand” for taking part in the offering. He noted the likelihood of further declines in the housing market, as well as uncertainty around what role the government will take in overseeing Freddie and sister company, Fannie Mae, now that it has outlined a plan to back the entities with billions in taxpayer dollars. The Treasury Department has hired Morgan Stanley to offer advice. “The only thing that does appear certain is that investors will seek additional guarantees from Freddie Mac in connection with investing in any future capital raising efforts,” O’Haire says.
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I’ve mentioned in the past that the, financial sector is one that I try to stay away from. I’ve never been comfortable with trading them. With all the creative financing that can be done, I don’t trust the financials

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