Freddie Mac 2012 Annual Report Download - page 86

Dividends and Dividend Restrictions
We did not pay any cash dividends on our common stock during 2012 or 2011.
Our payment of dividends is subject to the following restrictions:
Restrictions Relating to the Conservatorship
As Conservator, FHFA announced on September 7, 2008 that we would not pay any dividends on Freddie Mac’s
common stock or on any series of Freddie Mac’s preferred stock (other than the senior preferred stock). FHFA has instructed
our Board of Directors that it should consult with and obtain the approval of FHFA before taking actions involving
dividends. In addition, FHFA has adopted a regulation prohibiting us from making capital distributions during
conservatorship, except as authorized by the director of FHFA.
Restrictions Under the Purchase Agreement
The Purchase Agreement prohibits us and any of our subsidiaries from declaring or paying any dividends on Freddie
Mac equity securities (other than with respect to the senior preferred stock or warrant) without the prior written consent of
Treasury.
Restrictions Under the GSE Act
Under the GSE Act, FHFA has authority to prohibit capital distributions, including payment of dividends, if we fail to
meet applicable capital requirements. Under the GSE Act, we are not permitted to make a capital distribution if, after making
the distribution, we would be undercapitalized, except the Director of FHFA may permit us to repurchase shares if the
repurchase is made in connection with the issuance of additional shares or obligations in at least an equivalent amount and
will reduce our financial obligations or otherwise improve our financial condition. If FHFA classifies us as undercapitalized,
we are not permitted to make a capital distribution that would result in our being reclassified as significantly undercapitalized
or critically undercapitalized. If FHFA classifies us as significantly undercapitalized, approval of the Director of FHFA is
required for any dividend payment; the Director may approve a capital distribution only if the Director determines that the
distribution will enhance the ability of the company to meet required capital levels promptly, will contribute to the long-term
financial safety-and-soundness of the company, or is otherwise in the public interest. Our capital requirements have been
suspended during conservatorship.
Restrictions Under our Charter
Without regard to our capital classification, we must obtain prior written approval of FHFA to make any capital
distribution that would decrease total capital to an amount less than the risk-based capital level or that would decrease core
capital to an amount less than the minimum capital level. As noted above, our capital requirements have been suspended
during conservatorship.
Restrictions Relating to Subordinated Debt
During any period in which we defer payment of interest on qualifying subordinated debt, we may not declare or pay
dividends on, or redeem, purchase or acquire, our common stock or preferred stock. Our qualifying subordinated debt
provides for the deferral of the payment of interest for up to five years if either: (a) our core capital is below 125% of our
critical capital requirement; or (b) our core capital is below our statutory minimum capital requirement, and the Secretary of
the Treasury, acting on our request, exercises his or her discretionary authority pursuant to Section 306(c) of our charter to
purchase our debt obligations. FHFA has directed us to make interest and principal payments on our subordinated debt, even
if we fail to maintain required capital levels. As a result, the terms of any of our subordinated debt that provide for us to defer
payments of interest under certain circumstances, including our failure to maintain specified capital levels, are no longer
applicable. As noted above, our capital requirements have been suspended during conservatorship.
Restrictions Relating to Preferred Stock
Payment of dividends on our common stock is also subject to the prior payment of dividends on our 24 series of
preferred stock and one series of senior preferred stock, representing an aggregate of 464,170,000 shares and
1,000,000 shares, respectively, outstanding as of December 31, 2012. Payment of dividends on all outstanding preferred
stock, other than the senior preferred stock, is subject to the prior payment of dividends on the senior preferred stock. We
paid dividends on the senior preferred stock during 2012 at the direction of the Conservator, as discussed in “MD&A —
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