Freddie Mac Posts Loss, Cuts Dividend

Just one day after a 331 point rally in the Dow, Freddie had to come along and spoil everything by injecting a dose of reality back into the market.  The virtually-government-owned mortgage lender posted a net loss of $821 million or $1.63 a share, more than three times the size of average analyst estimates.  Credit-related expenses doubled from the first quarter to $2.8 billion and the company took a $1 billion writedown on subprime mortgages.  Freddie cut the dividend from 25 cents to 5 cents and restated its efforts to raise $5.5 billion of new capital.  Of course, raising capital will be significantly easier now that congress and the President have authorized Hank Paulson to buy unlimited amounts of equity in Fannie Mae and Freddie Mac.  With foreclosures on properties owned by Freddie increasing by 20% in the quarter, at least the government is going to get some hard assets for the money it is going to have to inject into the company.  Then, in the next fiscal stimulus package that is already percolating on capital hill, the government can send everyone a foreclosed property.  Even I have to admit that this would be a unique way to fulfill every U.S. citizen's wish to own his own home.