Freddie Mac 2009 Annual Report Download - page 105

Table 26 — Investments in Trading Securities
2009 2008 2007
December 31,
(in millions)
Mortgage-related securities:
Freddie Mac . . . . . ............................................................ $170,955 $158,822 $12,216
Fannie Mae .................................................................. 34,364 31,309 1,697
Ginnie Mae .................................................................. 185 198 175
Other . . . ................................................................... 28 32 1
Total mortgage-related securities . . . ............................................... 205,532 190,361 14,089
Non-mortgage-related securities:
Asset-backed securities .......................................................... 1,492 — —
Treasury bills. . . . . ............................................................ 14,787 — —
FDIC-guaranteed corporate medium-term notes . ......................................... 439 — —
Total non-mortgage-related securities ............................................... 16,718 — —
Total fair value of investments in trading securities ......................................... $222,250 $190,361 $14,089
Non-Mortgage-Related Securities
We held investments in non-mortgage-related available-for-sale and trading securities of $19.3 billion and $8.8 billion as
of December 31, 2009 and December 31, 2008, respectively. Our holdings of non-mortgage-related securities increased in
2009, as compared to 2008, to maintain required liquidity and contingency levels. At December 31, 2009, investments in
securities included $4.0 billion of non-mortgage-related asset-backed securities, $14.8 billion of Treasury bills and
$0.5 billion of FDIC-guaranteed corporate medium-term notes that we could sell to meet mortgage-funding needs, provide
diverse sources of liquidity or help manage the interest rate risk inherent in mortgage-related assets.
We recorded net impairment of available-for-sale securities recognized in earnings during 2009 of $185 million for our
non-mortgage-related securities, as we could not assert that we did not intend to, or we will not be required to, sell these
securities before a recovery of the unrealized losses. Such net impairments occurred in the first and second quarters of 2009;
no such net impairments were recorded for the third or fourth quarters of 2009 and no non-mortgage-related securities were
in an unrealized loss position at December 31, 2009. The decision to impair these securities is consistent with our
consideration of these securities as a contingent source of liquidity. We do not expect any contractual cash shortfalls related
to these securities. See “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Recently Adopted
Accounting Standards — Change in the Impairment Model for Debt Securities” to our consolidated financial statements for
information on how other-than-temporary impairments are recorded on our financial statements commencing in the second
quarter of 2009.
During the fourth quarter of 2008, we recognized other-than-temporary impairment charges on our non-mortgage-related
available-for-sale securities of $590 million, related to securities with $9.0 billion of unpaid principal balance, as
management could not assert the positive intent to hold these securities to recovery. Other-than-temporary impairments taken
on our non-mortgage-related securities during 2008 were $1.0 billion.
Table 27 provides credit ratings of our investments in non-mortgage-related asset-backed securities at December 31,
2009. Table 27 includes securities classified as either available-for-sale or trading on our consolidated balance sheets.
Table 27 — Investments in Non-Mortgage-Related Asset-Backed Securities
Collateral Type
Amortized
Cost
Fair
Value
Original %
AAA-rated
(1)
Current %
AAA-rated
(2)
Current
Investment
Grade
(3)
December 31, 2009
(dollars in millions)
Non-mortgage-related asset-backed securities:
Credit cards . . . . . . . . . ..................................... $2,523 $2,587 100% 100% 100%
Auto credit. . . . . . . . . . ..................................... 920 945 100 100 100
Equipment lease . . . . . . ..................................... 127 134 100 100 100
Student loans . . . . . . . . ..................................... 153 156 100 95 100
Stranded assets
(4)
.......................................... 82 84 100 100 100
Insurance premiums . . . ..................................... 131 139 100 100 100
Total non-mortgage-related asset-backed securities ..................... $3,936 $4,045 100 100 100
(1) Reflects the composition of the portfolio that was AAA-rated as of the date of our acquisition of the security, based on unpaid principal balance and the
lowest rating available.
(2) Reflects the AAA-rated composition of the securities as of February 11, 2010, based on unpaid principal balance as of December 31, 2009 and the
lowest rating available.
(3) Reflects the composition of these securities with credit ratings BBB⫺or above as of February 11, 2010, based on unpaid principal balance as of
December 31, 2009 and the lowest rating available.
(4) Consists of securities backed by liens secured by fixed assets owned by regulated public utilities.
102 Freddie Mac