Freddie Loss Leads To Aid

Freddie Mac is already using taxpayer-funds to pull itself out of the red.

Government-backed mortgage lender Freddie Mac (nyse: FRE - news - people ) put in a request for $13.8 billion in aid from the Treasury Friday after it posted a larger-than-expected, $25.3 billion loss in the third quarter. The relief request is for the exact amount of negative stockholder equity, meaning liabilities that exceed assets, that the firm held at the end of the period. American taxpayers can expect to spend billions more to prop up the lender as the U.S. housing market continues to deteriorate due to falling home prices, rising unemployment, and widespread foreclosures.

This was the last straw for some investors who had stuck with Freddie Mac, even after losing their shirts when the the company was taken over by regulators. The McLean, VA firm lost 9.6%, or 7 cents, to 66 cents during morning trading in New York, leaving it at a 98.5% discount from its year-ago price.

The yawning quarterly deficit related primarly to $14.3 billion in write-downs on tax credits that can't be redeemed due to insufficient taxable income, as well as $9.1 billion in losses on investments and $6.0 billion related to troubles in the U.S. housing market, including foreclosure expenses and credit losses.

When it pulled the firm into receivorship, the U.S. government agreed to buy up to $100.0 billion in interest-bearing prefered stock investments if the mortgage giant's liabilities outweighed assets. In light of last quarter's defecit, Freddie Mac expects to have an extra $13.8 billion in hand by Nov. 29. On Monday, its government-sponsored sibling Fannie Mae (nyse: FNM - news - people ) said it would probably need some taxpayer cash too if it posted another substantial deficit in the fourth quarter. (See "Fannie Mae's Tax Hit")