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Freddie Mac sees $12bn credit hit Freddie Mac sees $12bn credit hit
(20 minutes later)
Freddie Mac, the company that provides financing to US mortgage lenders, has become the latest firm to admit to higher losses in the sub-prime crisis.Freddie Mac, the company that provides financing to US mortgage lenders, has become the latest firm to admit to higher losses in the sub-prime crisis.
It now expects $10bn (£4.89bn) to $12bn in credit losses on its mortgage book, its chief executive told investors.It now expects $10bn (£4.89bn) to $12bn in credit losses on its mortgage book, its chief executive told investors.
A string of banks have registered losses because of their exposure to investment products linked to US sub-prime mortgages.A string of banks have registered losses because of their exposure to investment products linked to US sub-prime mortgages.
Freddie Mac is the second largest buyer and guarantor of home loans in the US.Freddie Mac is the second largest buyer and guarantor of home loans in the US.
"We would expect that our total future credit losses on our current book of business would total approximately between $10bn and $12bn, " Richard Syron, chief executive told investors."We would expect that our total future credit losses on our current book of business would total approximately between $10bn and $12bn, " Richard Syron, chief executive told investors.
Freddie Mac's share price
Shares in Freddie Mac slid more than 5% on the news to $33.07.
Trickle of losses
Last month, the firm set aside $1.2bn (£580m) to cover bad debts between July and September and reported a $2bn loss.Last month, the firm set aside $1.2bn (£580m) to cover bad debts between July and September and reported a $2bn loss.
Freddie Mac was created in 1970 by the US government, but later privatised. Investors, however, rate its bonds as if they were still backed by a government guarantee. Freddie Mac then announced that it would sell $6bn of shares to cover more bad debt losses.
It recently went back to capital markets to raise an additional $7bn. "Our fourth quarter results are not going to be effectively better than they were in the third quarter," Mr Syron told investors at a conference in New York.
"We are not promising a silver bullet, a short-term quick fix."
Freddie Mac was created in 1970 by the US government, but later privatised.
Investors, however, rate its bonds as if they were still backed by a government guarantee.
Its fellow government-sponsored lender, Fannie Mae, has also admitted big losses in the credit crisis.Its fellow government-sponsored lender, Fannie Mae, has also admitted big losses in the credit crisis.