Freddie Mac Mumbo Jumbo

Freddie Mac (NYSE:FRE) trumpeted its return to timely financial reporting with some mumbo jumbo that makes you wonder what lessons if any have been absorbed. Freddie Mac has been governance conflicted so investors should expect and regulators should demand some changes. Here is the quote from the press release that deals with some of the changes under the critical heading of Internal Controls.

"The company has made significant progress in addressing its internal control issues. For example, it has addressed the material weakness related to the adequacy of its staffing by adequately filling the company's critical vacancies in areas related to controls and financial reporting"

Basically that's like telling your wife that when the toilet was backed up you would hire a plumber. Freddie Mac needs to create credibility by explaining how they are really approaching the problem. We have hired a few guys to fix it sounds like they did not really believe they had a problem and are just responding to the bad PR.

In the meantime they are still reporting losses but have announced a share buy back program to return value to shareholders. They claim their capital is strong enough to meet regulatory requirements. Just getting by does not create long term confidence.

Richard F. Syron, chairman and chief executive officer was particularly proud that Freddie Mac took a leadership role in the sub prime mortgage market, announcing new underwriting standards and products and committing to purchase up to $20 billion in mortgages to support sub prime borrowers." The new underwriting standards is a big sleeper comment. Given the problems from sub prime what does that really mean. When Freddie Mac was conceptualized did they want to be in the sub prime markets.

Freddie welcome back but you need to speak more clearly.