Freddie Mac 2008 Annual Report Download - page 175

RISK MANAGEMENT AND DISCLOSURE COMMITMENTS
In October 2000, we announced our voluntary adoption of a series of commitments designed to enhance market
discipline, liquidity and capital. In September 2005, we entered into a written agreement with FHFA that updated these
commitments and set forth a process for implementing them. A copy of the letters between us and FHFA dated September 1,
2005 constituting the written agreement is incorporated by reference as an exhibit to this annual report on Form 10-K, and is
available on the Investor Relations page of our website at www.freddiemac.com/investors/sec filings/index.html. The status
of our commitments at December 31, 2008 follows:
Description Status
1. Periodic Issuance of Subordinated Debt:
• We will issue Freddie SUBS˛securities for public
secondary market trading that are rated by no fewer than
two nationally recognized statistical rating organizations.
• Freddie SUBS˛securities will be issued in an amount
such that the sum of total capital (core capital plus
general allowance for losses) and the outstanding balance
of “Qualifying subordinated debt” will equal or exceed
the sum of (i) 0.45% of outstanding PCs and Structured
Securities we guaranteed; and (ii) 4% of total on-balance
sheet assets. Qualifying subordinated debt is discounted
by one-fifth each year during the instrument’s last five
years before maturity; when the remaining maturity is less
than one year, the instrument is entirely excluded. We will
take reasonable steps to maintain outstanding
subordinated debt of sufficient size to promote liquidity
and reliable market quotes on market values.
• Each quarter we will submit to FHFA calculations of the
quantity of qualifying Freddie SUBS˛securities and total
capital as part of our quarterly capital report.
• Every six months, we will submit to FHFA a subordinated
debt management plan that includes any issuance plans
for the six months following the date of the plan.
• FHFA, as Conservator of Freddie Mac, has suspended the
requirements in the September 2005 agreement with
respect to issuance, maintenance, and reporting and
disclosure of Freddie Mac subordinated debt during the
term of conservatorship and thereafter until directed
otherwise.
• FHFA has directed Freddie Mac during the period of
conservatorship and thereafter until directed otherwise to
make, without deferral, all periodic principal and interest
payments on all outstanding subordinated debt, regardless
of Freddie Mac’s existing capital levels.
2. Liquidity Management and Contingency Planning:
• We will maintain a contingency plan providing for at least
three months’ liquidity without relying upon the issuance
of unsecured debt. We will also periodically test the
contingency plan in consultation with FHFA.
• We have in place a liquidity contingency plan, upon
which we report to FHFA on a daily basis. We believe
this liquidity contingency plan satisfies the existing three-
month liquidity contingency plan under our 2005 written
agreement with FHFA.
3. Interest-Rate Risk Disclosures:
• We will provide public disclosure of our duration gap,
PMVS-L and PMVS-YC interest-rate risk sensitivity
results on a monthly basis. See “QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET
RISK — Interest-Rate Risk and Other Market Risks —
Portfolio Market Value Sensitivity and Measurement of
Interest-Rate Risk” for a description of these metrics.
• For the year ended December 31, 2008, our duration gap
averaged zero months, PMVS-L averaged $397 million
and PMVS-YC averaged $73 million. Our 2008 monthly
average duration gap, PMVS results and related
disclosures are provided in our Monthly Volume Summary
which is available on our website,
www.freddiemac.com/investors/volsum and in current
reports on Form 8-K we file with the SEC.
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