Freddie Mac is considering issuing $10 billion worth of new common and preferred shares, the Wall Street Journal reports, a move that might stave off a full-blown government rescue—and the increased scrutiny that would come with it. Freddie has been emboldened by two days of big gains, with shares levitating over 29% on Wednesday and another 22% yesterday.
But there would also be major hurdles to such a plan. Freddie would have to offer big incentives with the new preferred shares, which would in turn reduce the money available for common stockholders. That could push stock prices, still down 76% on the year, yet lower. And it still might not prevent a costly bailout in the long run.