Wednesday, November 03, 2010

Freddie Mac Meets Teddy KGB - "I'm Paying You With Your Money"

Everyone who has seen the movie Rounders remembers the line from Teddy KGB when he tells Mike McD, "It's a f*cking joke anyway - after all, I am paying you with your money."

I used that quote previously on this blog when talking about AIG, but today's Freddie Mac announcement takes the cake, removes all ambiguity, and, well, has to make you laugh:

"The company had a net worth deficit of $58 million at September 30, 2010, compared to a net worth deficit of $1.7 billion at June 30, 2010. The deficit in net worth for the third quarter resulted from several contributing factors, including a dividend payment of $1.6 billion to Treasury, which exceeded total comprehensive income of $1.4 billion. To eliminate the third quarter net worth deficit, the Federal Housing Finance Agency (FHFA), as Conservator, will submit a request on the company's behalf to Treasury for a draw of $100 million under the Senior Preferred Stock Purchase Agreement"

So Freddie Mac has negative net worth because they had to pay a dividend to Treasury.  Solution?  Borrow money from Treasury!  Voila!  FIXED IT! (/sarcasm)

This takes "I'm paying you with your money" to a whole new level.  Life imitates art. Again.



Luke H. said...

That is amazing! Someone must be angling for the 2011 Ignoble Prize.

But What do I Know? said...

Kind of like how the government's revenue has shown marvelous improvement because of the coupon interest the Federal Reserve is making on its Treasury holdings. . .

Mark S said...

Damn, what a great gig! I have been giving "dividends" to the RedRock casino for years now, and all I get paid back in are beers.

Great post Kid!