Is this problematic?
Consider the following capital structure:
Anyone spot a teensy weensy leverage issue here? And a single concentrated risk factor perhaps? Add in a Q3 2007 loss of $2B and things look even worse. Never mind, these are matters for the U.S. taxpayer: these are Freddie Mac data. (Figures taken from the latest [2006] Annual Report and the latest earnings release.) Despite most people believing the Agencies carry a government guarantee, Freddie is trading in the default swap market at around 70 over according to Bloomberg. You can short the stock too...
Update. Quel suprise. Freddie is recapitalising and cutting its dividend.
- Security assets, chiefly RMBS: $700B
- Unpaid principal balances on securities issued, mostly covered bonds (i.e. RMBS with a guarantee from the issuer): $1.5T
- Total stockholder's equity: $25B
Anyone spot a teensy weensy leverage issue here? And a single concentrated risk factor perhaps? Add in a Q3 2007 loss of $2B and things look even worse. Never mind, these are matters for the U.S. taxpayer: these are Freddie Mac data. (Figures taken from the latest [2006] Annual Report and the latest earnings release.) Despite most people believing the Agencies carry a government guarantee, Freddie is trading in the default swap market at around 70 over according to Bloomberg. You can short the stock too...
Update. Quel suprise. Freddie is recapitalising and cutting its dividend.
Labels: Mortgage
posted by David Murphy at 15:12
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