Freddie Mac 2009 Annual Report Download - page 126

2007
Balance, Net
(1)
Weighted
Average
Effective Rate
(2)
Balance, Net
(3)
Weighted
Average
Effective Rate
(4)
Maximum
Balance, Net
Outstanding at Any
Month End
December 31,
Average Outstanding
During the Year
(dollars in millions)
Reference Bills˛securities and discount notes ......... $196,426 4.52% $158,467 5.02% $196,426
Medium-term notes . . . . ....................... 1,175 4.36 4,496 5.27 8,907
Federal funds purchased and securities sold under
agreements to repurchase . . . .................. — — 112 5.42 804
Subtotal . . ............................... 197,601 4.52
Current portion of long-term debt ................. 98,320 4.44
Short-term debt ............................ $295,921 4.49
(1) Represents par value, net of associated discounts, premiums and hedge-related basis adjustments, of which $6.3 billion and $1.6 billion of short-term
debt represents the fair value of debt securities with fair value option elected at December 31, 2009 and 2008. Includes foreign-currency related basis
adjustment at December 31, 2007.
(2) Represents the approximate weighted average effective rate for each instrument outstanding at the end of the period, which includes the amortization of
discounts or premiums and issuance costs. For 2009 and 2008, the current portion of long-term debt includes the amortization of hedging-related basis
adjustments.
(3) Represents par value, net of associated discounts, premiums and issuance costs. Issuance costs are reported in the other assets caption on our
consolidated balance sheets.
(4) Represents the approximate weighted average effective rate during the period, which includes the amortization of discounts or premiums and issuance
costs. For 2009 and 2008, the current portion of long-term debt includes the amortization of hedging-related basis adjustments.
Guarantee Obligation
See “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES” to our consolidated financial statements for
information regarding the accounting and measurement of our guarantee obligation.
Table 44 — Changes in Guarantee Obligation
2009 2008
December 31,
(in millions)
Beginning balance . . . . . . . . . . .............................................................. $12,098 $13,712
Deferred guarantee income of newly-issued guarantees. . . ............................................. 3,881 3,366
Other
(1)
................................................................................ (35) (154)
Static effective yield amortization:
Basic. . .............................................................................. (2,874) (2,660)
Cumulative catch-up . . . . . . . .............................................................. (605) (2,166)
Income on guarantee obligation . .............................................................. (3,479) (4,826)
Ending balance . . . . . . . . . . . . .............................................................. $12,465 $12,098
(1) Represents (a) portions of the guarantee obligation that correspond to incurred credit losses reclassified to reserve for guarantee losses on PCs and
(b) reductions associated with the extinguishment of our previously issued long-term credit guarantees upon conversion into either PCs or Structured
Transactions.
The primary drivers affecting our guarantee obligation balances are our credit guarantee business volumes and the rates
of amortization for these balances, including recognition of cumulative catch-up adjustments. Deferred guarantee income of
our newly issued guarantees increased to $3.9 billion during 2009, from $3.4 billion during 2008, primarily as a result of
issuing a higher volume of financial guarantees in 2009 than in 2008. We issued $475.4 billion and $357.9 billion of our
financial guarantees during 2009 and 2008, respectively. See “CONSOLIDATED RESULTS OF OPERATIONS — Non-
Interest Income (Loss) — Income on Guarantee Obligation” for a discussion of amortization income related to our guarantee
obligation.
Total Equity (Deficit)
Total equity (deficit) increased from $(30.6) billion at December 31, 2008 to $4.4 billion at December 31, 2009,
reflecting increases due to (i) $36.9 billion received in 2009 from Treasury under the Purchase Agreement, (ii) a
$17.8 billion decrease in our unrealized losses in AOCI, net of taxes, on our available-for-sale securities and (iii) $5.1 billion
as a result of the adoption of the amendment to the accounting standards for investments in debt and equity securities (as
discussed below). These increases in total equity (deficit) were partially offset during 2009 by a net loss of $21.6 billion and
$4.1 billion of senior preferred stock dividends declared. Future widening of mortgage-to-debt OAS could result in
unrealized losses on our available-for-sale securities. See “Investments in Securities” and “NOTE 6: INVESTMENTS IN
SECURITIES” to our consolidated financial statements for further discussion regarding our investments in securities and
other-than-temporary impairments.
Our retained earnings (accumulated deficit) and AOCI, net of taxes have changed as a result of the adoption of the
amendment to the accounting standards for investments in debt and equity securities. Upon our adoption of this accounting
123 Freddie Mac