Federal prison

8 August 2008 By Richard Beales Follow @richardbeales1

In another reminder that Fannie Mae and Freddie Mac are cuddlysounding nicknames for companies whose names actually begin with Federal , both US mortgage giants have slashed dividends after billions more in losses. They re right to do so, but shareholders will be the losers.

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Fannie Mae on August 8 reported a secondquarter net loss of $2.3bn, following a loss of $2.2bn in the first quarter. The company reduced its dividend on common stock to $0.05 a quarter from $0.35, aiming to preserve $1.9bn in capital by the end of 2009.

Freddie Mac on August 6 reported a secondquarter net loss of $821m, following a loss of $151m in the first quarter. The company reduced its dividend on common stock to $0.05 a quarter from $0.25.

Chief executive Richard Syron said: Freddie Mac was created to ensure the continued flow of funds to America's homebuyers, and we are pleased to be fulfilling that important mission. At a time of severe stress in the housing and credit markets, we are successfully providing critical liquidity and stability.

In a June 14, 2007 release, Syron said: Throughout the first quarter of 2007 Freddie Mac continued to build longterm shareholder value by strengthening and growing our core business. Our credit guarantee portfolio showed strong growth in the first quarter and we seized market opportunities to grow our retained portfolio prudently.

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