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Freddie Mac spends fortune to prop up market share

  • Never underestimate the power of a large bureaucracy trying to sustain itself. Freddie Mac (FMCC.OB) is spending hundreds of millions per year to hold onto market share instead of sending the money to the Treasury, reports the FT.
  • The money is going to lenders as compensation payments to make up for the fact that Freddie's MBS trade at a lower price than those of Fannie Mae (FNMA.OB). Deutsche Bank estimates it's totaled more than $2B since 2008 and Treasury is demanding changes which would unify the securities of the two GSEs. Fund managers - often limited in the amount of money they can allocated to a single security - have longed balked at the idea.
  • Despite the payments, Freddie's market share has declined to the low 30s from its long-term average of 40%.
Comments (2)
  • DeepValueLover
    , contributor
    Comments (8150) | Send Message
     
    Can somebody explain why they don't just let their book run off?

     

    That would go a long way to stop the intense political pressure to break up.

     

    Spending money to defend market share seems like a massive waste.
    12 Aug 2013, 04:21 PM Reply Like
  • dgfurr
    , contributor
    Comments (62) | Send Message
     
    Deutshce Bank? Isn't that one of the banks squirming because of the possible payouts to the GSE's over loan quality misrepresentation? If this is really something, why has no other outlet picked up the story? Sorry FT / you blew this one
    13 Aug 2013, 04:13 PM Reply Like
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