Big Benefit to S&Ls; Seen if Freddie Mac Goes Public

SAN DIEGO — The net worth of the savings and loan industry could rise dramatically if Congress passes legislation that would allow the public trading of shares in Federal Home Loan Mortgage Co. (Freddie Mac), according to S&L; industry observers.

Currently, only S&Ls--which; own virtually all of the quasi-public organization’s preferred shares--are permitted to trade Freddie Mac shares. However, in recent weeks, the price of Freddie Mac shares has shot up to $103 a share from about $60 a share, following speculation that Congress will allow public trading of the stock.

If the legislation introduced by U.S. Sen. Alfonse D’Amato (R.-N.Y.) passes, the per-share value of Freddie Mac preferred stock could rise to about $160 a share, according to Allan G. Bortel, an S&L; industry analyst with Shearson Lehman Brothers in San Francisco.

That would create a pre-tax “windfall” of $29.15 for Great American First Savings Bank, Freddie Mac’s single largest shareholder, according to Bortel.

S&L; executives support D’Amato’s bill because “it would strengthen Freddie Mac’s market position as a leader in the secondary market by giving it an opportunity to raise additional capital,” according to Great American President Roger Lindland.

Exercised Purchase Rights

Public trading of Freddie Mac stock also would boost the net worth of the S&L; industry because even at its existing price, Freddie Mac stock accounts for about 12% of the S&L; industry’s net worth, Lindland said.

And with more money available, consumers could realize lower-cost home loans.

Great American has acquired 813,678 shares at an average price of $66.934 a share, according to Lindland. The San Diego-based S&L; accumulated that hefty chunk of Freddie Mac’s stock by exercising stock purchase rights following the acquisition of six other S&Ls.;

The S&L; acquisitions have given Great American the right to purchase up to a total of 1.05 million shares, Lindland said. Great American acquired Freddie Mac shares because “of the excellent earnings and operating record of the business and its future value,” he said.

A complex rights formula determines how many shares of Freddie Mac stock each of the nation’s S&Ls; can purchase. All but 2% of Freddie Mac’ stock is held by S&Ls.; The remainder is held by a small group of Wall Street firms that make a market for Freddie Mac stock.