Freddie Mac 2008 Annual Report Download - page 234

In accordance with FHFA’s capital monitoring framework, we obtained FHFA’s approval for the preferred stock
redemption and common stock repurchase activities described above.
Dividends Declared During 2008
On March 7, 2008 and June 6, 2008, our Board of Directors declared a quarterly dividend on our common stock of
$0.25 per share and dividends on our preferred stock consistent with the contractual rates and terms shown in Table 9.1. No
common dividends were declared in the last six months of 2008. On December 31, 2008, we paid dividends of $172 million
in cash on the senior preferred stock at the direction of our Conservator. We did not declare or pay dividends on any other
series of preferred stock outstanding during the last six months of 2008.
Exchange Listing of Common Stock and Preferred Stock
On November 17, 2008, we received a notice from the NYSE that we had failed to satisfy one of the NYSE’s standards
for continued listing of our common stock. Specifically, the NYSE advised us that we were “below criteria” for the NYSE’s
price criteria for common stock because the average closing price of our common stock over a consecutive 30 trading-day
period was less than $1 per share. As a result, the NYSE informed us that we were not in compliance with the NYSE’s
continued listing criteria under Section 802.01C of the NYSE Listed Company Manual. As of March 2, 2009, our common
stock continued to trade on the NYSE, while our average share price for the 30 consecutive days ended March 2, 2009
continued to be less than $1 per share.
On December 2, 2008, we advised the NYSE of our intent to cure this deficiency by May 18, 2009, and that we may
undertake a reverse stock split in order to do so. On February 26, 2009, the NYSE submitted a rule change to the SEC
(which the SEC has designated effective as of that date) suspending the application of its minimum price listing standard
until June 30, 2009. Under this rule change, we can return to compliance with the minimum price standard during the
suspension period if at the end of any calendar month during the suspension our common stock has a closing price of at least
$1 on the last trading day of such month and a $1 average share price based on the 30 trading days preceding the end of
such month. If we do not regain compliance during the suspension period, the six-month compliance period that began on
November 17, 2008 will recommence and we will have the remaining balance of that period to meet the standard.
If we fail to cure this deficiency when the minimum price standard recommences, the NYSE rules provide that the
NYSE will initiate suspension and delisting procedures. The delisting of our common stock would likely also result in the
delisting of our NYSE-listed preferred stock. The delisting of our common stock or NYSE-listed preferred stock would
require any trading in these securities to occur in the over-the-counter market and could adversely affect the market prices
and liquidity of the markets for these securities. If necessary, we will work with our Conservator to determine the specific
action or actions that we may take to cure the deficiency, but there is no assurance any actions we may take will be
successful.
NOTE 10: REGULATORY CAPITAL
On October 9, 2008, FHFA announced that it was suspending capital classification of us during conservatorship in light
of the Purchase Agreement. Concurrent with this announcement, FHFA classified us as undercapitalized as of June 30, 2008
based on discretionary authority provided by statute. FHFA noted that although our capital calculations as of June 30, 2008
reflected that we met the statutory and FHFA-directed requirements for capital, the continued market downturn in July and
August of 2008 raised significant questions about the sufficiency of our capital. Factors cited by FHFA leading to the
downgrade in our capital classification and the need for conservatorship included (a) our accelerated safety and soundness
weaknesses, especially with regard to our credit risk, earnings outlook and capitalization, (b) continued and substantial
deterioration in equity, debt and mortgage-related securities market conditions, (c) our current and projected financial
performance, (d) our inability to raise capital or issue debt according to normal practices and prices, (e) our critical
importance in supporting the U.S. residential mortgage markets and (f) concerns over the growing proportion of intangible
assets as part of our core capital.
FHFA continues to closely monitor our capital levels, but the existing statutory and FHFA-directed regulatory capital
requirements are not binding during conservatorship. We continue to provide our regular submissions to FHFA on both
minimum and risk-based capital. FHFA continues to publish relevant capital figures (minimum capital requirement, core
capital, and GAAP net worth) but does not publish our critical capital, risk-based capital or subordinated debt levels during
conservatorship. Additionally, FHFA announced it will engage in rule-making to revise our minimum capital and risk-based
capital requirements. Our regulatory capital standards in effect prior to our entry into conservatorship on September 6, 2008
are described below.
Regulatory Capital Standards
The Federal Housing Enterprises Financial Safety and Soundness Act of 1992, or GSE Act, established minimum,
critical and risk-based capital standards for us.
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