About Freddie Mac

❖ Freddie Mac (originally known as the Federal Home Loan Mortgage Corporation) is a federally backed
mortgage financing giant which was chartered by Congress in 1970

❑ to support the U.S. housing finance system and 

❑ to help ensure a reliable and affordable supply of mortgage funds across the country.

Manipulation

❖ Freddie Mac financial scandal is one of the biggest scandal in the history. In 2003, it was discovered that Freddie
Mac had intentionally understated earnings in the company’s books almost $5 ($4.456) billion through 2000 to
2002.

❖ Comparison of net income as originally reported for 2000, 2001 and 2002, and as restated:

Years Previously Reported Net Income Restated Net Income Change Percent Change
2000 $2.547 billion $3.666 billion $1.119 billion 30.50%
2001 $4.147 billion $3.158 billion ($989 million) -23.80%
2002 $5.764 billion $10.090 billion $4.326 billion 42.90%

Reason Of Manipulation

❖ To meet the expectation of wall street (smooth and steady growth).

❖ WALL STREET is the influential financial interests of the U.S economy.

How They Got Caught

The alleged accounting errors were uncovered in part by accounting firm PricewaterhouseCoopers LLP, which Freddie
hired in March 2002, when Arthur Andersen was being criticized for its audits of Enron Corp.

Consequences

❖ A civil penalty of $125 million and implement measures to correct its accounting and governance problems as
part of a consent order with a federal regulator;

❖ Freddie Mac profit declined 52% in 2003; 4.9 from 10.090

❖ Because of this scandal US govt. brought new regulations so that such scandals occur again corporate world to
be followed ;

❖ Because of this manupulation Freddie mac lost its trustworthiness and No one wanted to invest ;

❖ A factor in the housing crash.