Capital Markets

Freddie Mac Sets $2B Buyback

The repurchase comes on the heels of a 25 percent decline in the share price this year.
Stephen TaubOctober 6, 2005

Freddie Mac announced that its board of directors gave it authority to repurchase up to $2 billion worth of its shares, or roughly 5 percent of its total outstanding.

The embattled mortgage provider’s share price climbed about 2.7 percent on Wednesday and nearly 4 percent by midday Thursday. The New York Times noted, however, that the buyback — Freddie Mac’s first in three years — comes on the heels of a 25 percent decline in the share price this year.

“This is a first step in managing our capital position to generate better value for shareholders, while at all times remaining well capitalized and well positioned to take advantage of market opportunities,” said chairman and chief executive officer Richard F. Syron, in a statement.

Freddie Mac added that the transactions will have no material impact on its regulatory capital surplus, including the 30 percent target set in January 2004 by the Office of Federal Housing Enterprise Oversight. The company had previously obtained OFHEO’s approval for the repurchase.

In December 2003, federal regulators ordered Freddie Mac to pay a record $125 million fine for alleged management misconduct and violation of its public trust in connection with its $5 billion earnings misstatement. To handle mounting risk at Freddie Mac and its sister company Fannie Mae, federal legislators have reportedly proposed that OFHEO be replaced by a regulator with increased supervisory powers.