Freddie Mac 2009 Annual Report Download - page 234

Business Objectives
We continue to operate under the conservatorship that commenced on September 6, 2008, conducting our business
under the direction of FHFA as our Conservator. We are also subject to certain constraints on our business activities by
Treasury due to the terms of, and Treasury’s rights under, the Purchase Agreement. The conservatorship and related
developments have had a wide-ranging impact on us, including our regulatory supervision, management, business, financial
condition and results of operations. Upon its appointment, FHFA, as Conservator, immediately succeeded to all rights, titles,
powers and privileges of Freddie Mac, and of any stockholder, officer or director of Freddie Mac with respect to Freddie
Mac and its assets, and succeeded to the title to all books, records and assets of Freddie Mac held by any other legal
custodian or third party. During the conservatorship, the Conservator delegated certain authority to the Board of Directors to
oversee, and to management to conduct, day-to-day operations so that the company can continue to operate in the ordinary
course of business.
Our business objectives and strategies have in some cases been altered since we entered into conservatorship, and may
continue to change. Based on our charter, public statements from Treasury and FHFA officials and guidance given to us by
our Conservator we have a variety of different, and potentially competing, objectives, including:
• providing liquidity, stability and affordability in the mortgage market;
• continuing to provide additional assistance to the struggling housing and mortgage markets;
• reducing the need to draw funds from Treasury pursuant to the Purchase Agreement;
• returning to long-term profitability; and
• protecting the interests of the taxpayers.
These objectives create conflicts in strategic and day-to-day decision making that will likely lead to suboptimal
outcomes for one or more, or possibly all, of these objectives. We regularly receive direction from our Conservator on how
to pursue our objectives under conservatorship, including direction to focus our efforts on assisting homeowners in the
housing and mortgage markets. The Conservator and Treasury also did not authorize us to engage in certain business
activities and transactions, including the sale of certain assets, some of which we believe may have had a beneficial impact
on our results of operations or financial condition, if executed. Our inability to execute such transactions may adversely
affect our profitability, and thus contribute to our need to draw additional funds from Treasury. However, we believe that the
increased support provided by Treasury pursuant to the December 2009 amendment to the Purchase Agreement, described
below, is sufficient to ensure that we maintain our access to the debt markets, and maintain positive net worth and liquidity
to continue to conduct our normal business activities over the next three years.
Certain changes to our business objectives and strategies are designed to provide support for the mortgage market in a
manner that serves public mission and other non-financial objectives, but may not contribute to our profitability. Our efforts
to help homeowners and the mortgage market, in line with our public mission, may help to mitigate our credit losses, but
some of these efforts are expected to have an adverse impact on our near and long-term financial results. As a result, in
some cases the objectives of reducing the need to draw funds from Treasury and returning to long-term profitability will be
subordinated as we provide this assistance. There is significant uncertainty as to the ultimate impact that our efforts to aid
the housing and mortgage markets will have on our future capital or liquidity needs and we cannot estimate whether, and the
extent to which, costs we incur in the near term as a result of these efforts, which for the most part we are not reimbursed
for, will be offset by the prevention or reduction of potential future costs.
Management is continuing its efforts to identify and evaluate actions that could be taken to reduce the significant
uncertainties surrounding our business, as well as the level of future draws under the Purchase Agreement; however, our
ability to pursue such actions may be limited by market conditions and other factors. Any actions we take related to the
uncertainties surrounding our business and future draws will likely require approval by FHFA and Treasury before they are
implemented. In addition, FHFA, Treasury or Congress may have a different perspective than management and may direct us
to focus our efforts on supporting the mortgage markets in ways that make it more difficult for us to implement any such
actions.
In a letter to the Chairmen and Ranking Members of the Congressional Banking and Financial Services Committees
dated February 2, 2010, the Acting Director of FHFA stated that minimizing our credit losses is our central goal and that we
will be limited to continuing our existing core business activities and taking actions necessary to advance the goals of the
conservatorship. The Acting Director stated that FHFA does not expect we will be a substantial buyer or seller of mortgages
for our mortgage-related investments portfolio, except for purchases of delinquent mortgages out of PC pools. The Acting
Director also stated that permitting us to engage in new products is inconsistent with the goals of the conservatorship.
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