Freddie Mac 2009 Annual Report Download - page 257

Trading Securities
Table 6.9 summarizes the estimated fair values by major security type for our investments in trading securities.
Table 6.9 — Trading Securities
2009 2008
December 31,
(in millions)
Mortgage-related securities:
Freddie Mac ......................................................................... $170,955 $158,822
Fannie Mae.......................................................................... 34,364 31,309
Ginnie Mae.......................................................................... 185 198
Other . . ............................................................................ 28 32
Total mortgage-related securities ........................................................ 205,532 190,361
Non-mortgage-related securities:
Asset-backed securities . ............................................................... 1,492 —
Treasury bills . . ..................................................................... 14,787 —
FDIC-guaranteed corporate medium-term notes ................................................ 439 —
Total non-mortgage-related securities . . . .................................................. 16,718 —
Total fair value of trading securities . . . ........................................................ $222,250 $190,361
For the years ended December 31, 2009, 2008 and 2007 we recorded net unrealized gains (losses) on trading securities
held at December 31, 2009, 2008 and 2007 of $4.3 billion, $1.6 billion and $505 million, respectively.
Total trading securities include $3.3 billion and $3.9 billion, respectively, of assets as defined by the derivative and
hedging accounting guidance regarding certain hybrid financial instruments as of December 31, 2009 and 2008. Gains
(losses) on trading securities on our consolidated statements of operations include gains of $96 million and $249 million,
respectively, related to these trading securities for the years ended December 31, 2009 and 2008.
Impact of the Purchase Agreement and FHFA Regulation on the Mortgage-Related Investments Portfolio
Under the Purchase Agreement with Treasury and FHFA regulation, the unpaid principal balance of our mortgage-
related investments portfolio could not exceed $900 billion as of December 31, 2009, and must decline by 10% per year
thereafter until it reaches $250 billion. The annual 10% reduction in the size of our mortgage-related investments portfolio,
the first of which is effective on December 31, 2010, is calculated based on the maximum allowable size of the mortgage-
related investments portfolio, rather than the actual unpaid principal balance of the mortgage-related investments portfolio, as
of December 31 of the preceding year. Due to this restriction, the unpaid principal balance of our mortgage-related
investments portfolio may not exceed $810 billion as of December 31, 2010. The limitation will be determined without
giving effect to any change in the accounting standards related to transfers of financial assets and consolidation of VIEs or
any similar accounting standard. The unpaid principal balance of our mortgage-related investments portfolio, as defined
under the Purchase Agreement and FHFA regulation, was $755.3 billion at December 31, 2009.
Collateral Pledged
Collateral Pledged to Freddie Mac
Our counterparties are required to pledge collateral for securities purchased under agreements to resell transactions and
most derivative instruments subject to collateral posting thresholds generally related to a counterparty’s credit rating. We had
cash pledged to us related to derivative instruments of $3.1 billion and $4.3 billion at December 31, 2009 and 2008,
respectively. Although it is our practice not to repledge assets held as collateral, a portion of the collateral may be repledged
based on master agreements related to our derivative instruments. At December 31, 2009 and 2008, we did not have
collateral in the form of securities pledged to and held by us under these master agreements. Also at December 31, 2009 and
2008, we did not have securities pledged to us for securities purchased under agreements to resell transactions that we had
the right to repledge.
In addition, we hold cash collateral primarily in connection with certain of our multifamily guarantees as credit
enhancements. The cash collateral held related to these transactions at December 31, 2009 and 2008 was $322 million and
$376 million, respectively.
Collateral Pledged by Freddie Mac
We are also required to pledge collateral for margin requirements with third-party custodians in connection with secured
financings, interest-rate swap agreements, futures and daily trade activities with some counterparties. The level of collateral
pledged related to our derivative instruments is determined after giving consideration to our credit rating. As of
December 31, 2009, we had one uncommitted intraday line of credit with a third party, which is secured, in connection with
the Federal Reserve’s payments system risk policy, which restricts or eliminates delinquent overdrafts by the GSEs, in
connection with our use of the fedwire system. In certain circumstances, the line of credit agreement gives the secured party
254 Freddie Mac