Freddie Mac 2008 Annual Report Download - page 170

Cash and Other Investments Counterparties
Institutional credit risk also arises from the potential insolvency or non-performance of other counterparties of
investment-related agreements. Instruments presented as cash equivalents, federal funds sold and securities purchased under
agreements to resell are generally arrangements with issuers or counterparties that are categorized as investment grade at the
time of our purchase or initiation and are primarily short-term in nature. We regularly evaluate these instruments to
determine if any impairment in fair value requires an impairment loss recognition in earnings, warrants divestiture or requires
a combination of both. To minimize counterparty risk of our on-balance-sheet assets, we intend to access government
programs and initiatives designed to support the economic environment in general and the credit and mortgage markets in
particular. For example, we have adjusted our policies and exposure measurement methodology to reflect the FDIC’s added
insurance coverage on principal and interest deposits up to $250,000 per borrower. We also intend to structure future federal
funds sold or other senior unsecured debt transactions to qualify for government guarantees under the FDIC Temporary
Liquidity Guarantee Program, which will require that, among other things, the original maturities of these transactions
exceed 30 days. Because there currently is not a heavily traded market for federal funds sold transactions with terms over
30 days, the impact to us of utilizing this structure is uncertain. We also manage significant cash flow for the securitization
trusts that are created with our issuance of PCs and Structured Securities. See “BUSINESS — Our Business and Statutory
Mission — Our Business Segments —Single-Family Guarantee Segment — Securitization Activities” for further information
on these off-balance sheet transactions.
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