Freddie Mac 2010 Annual Report Download - page 227

recognized as mortgage loans held-for-investment by consolidated trusts and the beneficial interests issued by the
consolidated securitization trusts and held by third parties are recognized as debt securities of consolidated trusts held by
third parties on our consolidated balance sheets. See “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES — Securitization Activities through Issuances of Freddie Mac Mortgage-Related Securities” for additional
information.
Under the Purchase Agreement, without the prior written consent of Treasury, we may not incur indebtedness that
would result in the par value of our aggregate indebtedness exceeding 120% of the amount of mortgage assets we are
allowed to own on December 31 of the immediately preceding calendar year. Our debt cap under the Purchase Agreement
was $1.08 trillion in 2010 and will be $972 billion in 2011.
Because of this debt limit, we may be restricted in the amount of debt we are allowed to issue to fund our operations.
Under the Purchase Agreement, the amount of our “indebtedness” is 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. We
also cannot become liable for any subordinated indebtedness, without the prior consent of Treasury.
As of December 31, 2010, we estimate that the par value of our aggregate indebtedness totaled $728.2 billion, which
was approximately $351.8 billion below the applicable limit of $1.08 trillion. Our aggregate indebtedness is calculated as the
par value of: (a) total debt, net; less (b) debt securities of consolidated trusts held by third parties.
In the tables that follow, the categories of short-term debt (due within one year) and long-term debt (due after one year)
are based on the original contractual maturity of the debt instrument classified as other debt.
Table 9.1 summarizes the interest expense and the balances of total debt, net per our consolidated balance sheets. Prior
periods have been reclassified to conform to the current presentation.
Table 9.1 — Total Debt, Net
2010 2009 2008 December 31, 2010 December 31, 2009
Interest Expense for the
Year Ended December 31, Balance, Net at
(1)
(in millions) (in millions)
Other debt:
Short-term debt ..................................... $ 552 $ 2,234 $ 6,800 $ 197,106 $238,171
Long-term debt:
Senior debt ....................................... 16,317 19,754 26,278 516,123 541,735
Subordinated debt . ................................. 46 162 254 711 698
Total long-term debt ................................ 16,363 19,916 26,532 516,834 542,433
Total other debt ..................................... 16,915 22,150 33,332 713,940 780,604
Debt securities of consolidated trusts held by third parties . . ........ 75,216 — — 1,528,648 —
Total debt, net ...................................... $92,131 $22,150 $33,332 $2,242,588 $780,604
(1) Represents par value, net of associated discounts, premiums and hedge-related basis adjustments, with $0.9 billion and $0.5 billion, respectively, of other
short-term debt, and $3.6 billion and $8.4 billion, respectively, of other long-term debt that represents the fair value of debt securities with the fair value
option elected at December 31, 2010 and 2009.
During 2010 and 2009, we recognized fair value gains (losses) of $581 million and $(405) million, respectively, on our
foreign-currency denominated debt, of which $461 million and $(209) million, respectively, are gains (losses) related to our
net foreign-currency translation.
Other Short-Term Debt
As indicated in Table 9.2, a majority of other short-term debt consisted of Reference Bills˛securities and discount
notes, paying only principal at maturity. Reference Bills˛securities, discount notes, and medium-term notes are unsecured
general corporate obligations. Certain medium-term notes that have original maturities of one year or less are classified as
other short-term debt.
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