Freddie Mac 2006 Annual Report Download - page 104

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 aÅected by situations
where current Ñnancial statements are not available. The status of our commitments at December 31, 2006 follows:
Description Status
1. Periodic Issuance of Subordinated Debt:
‚ We will issue Freddie SUBS» securities for public ‚ Consistent with promoting the liquidity of our securities,
secondary market trading that are rated by no less in December 2006 we issued approximately $2.0 billion
than two nationally recognized statistical rating of Freddie SUBS» securities, including approximately
organizations. $1.5 billion issued in exchange for previously issued
Freddie SUBS» securities. In addition, we called
‚ Freddie SUBS» securities will be issued in an amount approximately $1.0 billion of previously issued Freddie
such that the sum of Total capital (Core capital plus SUBS» securities in August 2006 and issued
general allowance for losses) and the outstanding approximately $1.25 billion of Freddie SUBS» securities
balance of ""Qualifying subordinated debt'' will equal in June 2006. We did not issue, call or repurchase any
or exceed the sum of 0.45 percent of outstanding PCs Freddie SUBS» securities during 2005 and 2004. Our
and Structured Securities we guaranteed and ability to issue additional subordinated debt may be
4 percent of total on-balance sheet assets. Qualifying limited until we return to regular Ñnancial reporting.
subordinated debt is discounted by one-Ñfth each year
during the instrument's last Ñve years before maturity; ‚ All Freddie SUBS» securities issued in 2006 were rated
when the remaining maturity is less than one year, by no less than two nationally recognized statistical
the instrument is entirely excluded. We will take rating organizations.
reasonable steps to maintain outstanding subordinated ‚ We reported to OFHEO that at December 31, 2006, we
debt of suÇcient size to promote liquidity and reliable had $42.6 billion in Total capital plus qualifying
market quotes on market values. subordinated debt, resulting in a surplus of $5.0 billion.
‚ Each quarter we will submit to OFHEO calculations During 2006, we submitted our quarterly Total capital
of the quantity of qualifying Freddie SUBS»plus qualifying subordinated debt reports to OFHEO.
securities and Total capital as part of our quarterly ‚ We have submitted our semi-annual subordinated debt
capital report. management plans to OFHEO.
‚ Every six months, we will submit to OFHEO a
subordinated debt management plan that includes any
issuance plans for the six months following the date
of the plan.
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 weekly basis. We
issuance of unsecured debt. We will also periodically periodically test this plan in accordance with our
test the contingency plan in consultation with agreement with OFHEO.
OFHEO.
3. Interest-Rate Risk Disclosures:
‚ We will provide public disclosure of our duration gap, ‚ For the twelve months ended December 31, 2006, our
PMVS-L and PMVS-YC interest-rate risk sensitivity duration gap averaged zero month, PMVS-L averaged
results on a monthly basis. See ""RISK 1 percent and PMVS-YC averaged zero percent. Our
MANAGEMENT Ì Interest-Rate Risk and Other 2006 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.
92 Freddie Mac