Freddie Posts Loss, Increases Level 3 Assets to "Beat" Estimates

Freddie Mac shares rose this morning as the company posted a narrower loss than estimated by analysts. Freddie lost $151 million in the first quarter. How did the company pull off this amazing feat despite growing delinquencies and a bleak housing outlook? The company, known for its creative accounting in the past, pulled a few tricks out of its sleeve, and shuffled some assets around. Freddie increased its assets classified as Level 3 to $157 billion from $32 billion. A quick reminder to those who don't keep up with arcane financial accounting rules, Level 3 assets can't be sold today because no price exists in the market. If you put Level 3 assets up for sale on Ebay, the listing would expire. Freddie is basically guessing at the price of these securities based on its own pricing models. It is also raising $5.5 billion in capital to help overcome "rising credit costs." Investors who buy into this new sale of common and preferred shares are betting that the company, which has already endured an incredibly embarrassing accounting scandal in the past, has cleaned up its accounting house. Personally, I'd rather throw all my chips on the roulette table.