Freddie Mac 2005 Annual Report Download - page 106

RISK MANAGEMENT AND DISCLOSURE COMMITMENTS
In October 2000, we announced our voluntary adoption of a series of commitments designed to enhance market discipline,
liquidity and capital. In September 2005, we entered into a written agreement with OFHEO that updated these
commitments and set forth a process for implementing them. The letters between the company and OFHEO dated
September 1, 2005 constituting the written agreement are available on the Investor Relations page of our website at
www.freddiemac.com/investors/reports.html#commit. As noted in these letters, disclosures may be affected by situations
where current financial statements are not available. Our commitments at December 31, 2005 follow:
Description Status
1. Periodic Issuance of Subordinated Debt:
‚ We will issue Freddie SUBS» for public secondary ‚ We did not issue any Freddie SUBS» during 2005, 2004
market trading that are rated by no less than two or 2003. We issued approximately $1.25 billion of
nationally recognized statistical rating organizations. Freddie SUBS» in June 2006. Our ability to issue
‚ Freddie SUBS» will be issued in an amount such additional subordinated debt may be limited until we
that the sum of Total capital (core capital plus return to regular Ñnancial reporting. During 2001 and
general allowance for losses) and the outstanding 2002, we completed a total of four oÅerings of Freddie
balance of ""Qualifying subordinated debt'' will equal SUBS» that provided approximately $5.5 billion in net
or exceed the sum of 0.45 percent of outstanding PCs proceeds.
and Structured Securities we guaranteed and ‚ At December 31, 2005, we had $5.5 billion in qualifying
4 percent of total on-balance sheet assets. Each Freddie SUBS» outstanding and Total capital, for the
quarter we will submit to OFHEO calculations of the purpose of this calculation, in the amount of
quantity of qualifying Freddie SUBS» and Total $36.4 billion, resulting in a surplus of $5.2 billion.
capital as part of our quarterly capital report. ‚ We have submitted our semi-annual subordinated debt
‚ Every six months, beginning January 1, 2006, we will management plan to OFHEO.
submit to OFHEO a subordinated debt management ‚ We expect to issue additional subordinated debt in a
plan that includes any issuance plans for the six principal amount in excess of $1 billion from time to
months following the date of the plan. time during the remainder of 2006, subject to market
conditions and other factors.
2. Liquidity Management and Contingency Planning:
‚ We will maintain a contingency plan providing for at ‚ We have in place a liquidity contingency plan, upon
least three months' liquidity without relying upon the which we report to OFHEO on a monthly basis. During
issuance of unsecured debt. We will also periodically the second quarter of 2006, we also began our periodic
test the contingency plan in consultation with testing.
OFHEO.
3. Interest-Rate Risk Disclosures:
‚ We will provide public disclosure of our duration gap, ‚ For the twelve months ended December 31, 2005, our
PMVS-L and PMVS-YC interest-rate risk sensitivity duration gap averaged zero months, PMVS-L averaged
results on a monthly basis. See ""RISK one percent and PMVS-YC averaged zero percent. Our
MANAGEMENT Ì Interest-Rate Risk and Other 2005 monthly average duration gap, PMVS results and
Market Risks Ì Portfolio Market Value Sensitivity and related disclosures are provided in our Monthly Volume
Measurement of Interest-Rate Risk'' for a description of Summary which is available on our website,
these metrics. www.FreddieMac.com/investors/volsum.
90 Freddie Mac