Freddie Hunts for Cash

Wall Street Journal (08/22/08) P. C1; Hagerty, James R.; Sidel, Robin
Freddie Mac executives insist the government-sponsored enterprise has more capital that currently required, but they remain committed to raising $5.5 billion in additional capital due to the present state of the market. Fannie Mae generated an additional $7.4 billion in capital in recent months, but announced that uncertainty about future losses could force it to raise more in the near future. However, investors are hesitant to purchase common or preferred shares in the two GSEs due to concerns that their investments would lose value if the Treasury needs to bail them out of financial crisis. Additionally, uncertainty with regard to the Federal Housing Finance Agency's authority over Fannie Mae and Freddie Mac's capital requirements makes it difficult for investors to gauge their profit outlook.