Freddie Mac 2015 Annual Report Download - page 180

Risk Factors Conservatorship and Related Matters
Freddie Mac 2015 Form 10-K 178
From time to time, FHFA and Treasury have prevented us from engaging in business activities or
transactions that we believe would be profitable, and they may do so again in the future. For example,
FHFA could limit the amount of securities we could sell or further limit the size of our mortgage-related
investments portfolio.
The Purchase Agreement and the terms of the senior preferred stock also place significant restrictions on
our ability to manage our business, including limiting:
• The amount of indebtedness we may incur;
• The size of our mortgage-related investments portfolio; and
• Our ability to pay dividends, transfer certain assets, raise capital, and pay down the liquidation
preference of the senior preferred stock.
The Purchase Agreement prohibits us from taking a variety of actions without Treasury's consent.
Treasury has the right to withhold its consent for any reason. The warrant held by Treasury, the
restrictions on our business under the Purchase Agreement, and the senior status and net worth dividend
provisions of the senior preferred stock could adversely affect our ability to attract capital from the private
sector in the future, should we be in a position to do so.
If FHFA places us into receivership, our assets would be liquidated. The liquidation proceeds may
not be sufficient to pay claims outstanding against Freddie Mac, repay the liquidation preference
of our preferred stock, or make any distribution to our common stockholders.
We can be put into receivership at the discretion of the Director of FHFA at any time for a number of
reasons set forth in the GSE Act. In addition, FHFA could be required to place us into receivership if
Treasury is unable to provide us with funding requested under the Purchase Agreement to address a
deficit in our net worth. Treasury might not be able to provide the requested funding if, for example, the
U.S. government were not fully operational because Congress had failed to approve funding or the
government had reached its borrowing limit. For more information, see "MD&A - Regulation and
Supervision - Federal Housing Finance Agency - Receivership."
Being placed into receivership would terminate the conservatorship. The purpose of receivership is to
liquidate our assets and resolve claims against us. The appointment of FHFA as our receiver would
terminate all rights and claims that our stockholders and creditors may have against our assets or under
our Charter arising as a result of their status as stockholders or creditors, other than the potential ability to
be paid upon our liquidation. Bills considered by Congress in 2014 and 2015 provided for Freddie Mac to
eventually be placed into receivership.
If our assets were liquidated, the liquidation proceeds may not be sufficient to pay the secured and
unsecured claims against us, repay the liquidation preference of any series of our preferred stock, or
make any distribution to our common stockholders. If we are placed into receivership and do not or
cannot fulfill our guarantee to the holders of our mortgage-related securities, such holders could become
unsecured creditors with respect to claims made under our guarantee.
Proceeds would be available to repay the liquidation preference of other series of preferred stock only
after paying the secured and unsecured claims of the company, the administrative expenses of the
receiver and the liquidation preference of the senior preferred stock. Finally, only after the liquidation
preference of all series of preferred stock is repaid would any proceeds be available for distribution to the
holders of our common stock.