Freddie Mac (NYSE:FRE) is one of two mortgage giants established by the U.S. federal government to provide liquidity in the secondary mortgage market, along with sister company Fannie Mae (FNM). Freddie buys mortgages from banks and other financial institutions and packages them into bonds called mortgage-backed securities (MBS), which it sells to investors of all sizes. Freddie was structured to play a dominant role in the secondary mortgage market and ensure a steady and reliable supply of funds for U.S. homebuyers. In August 2008, the U.S. federal government's implicit backing of Freddie Mac became explicit, with Treasury Secretary Henry Paulson announcing that Congress had approved a plan giving the Treasury the authority to bail out Freddie if its capital levels dipped too low.[1] Investors feared a significant infusion of capital from the U.S. government would dilute the value of their holdings, and they punished Freddie's stock, which fell by as much as 90% in 2008.[2]