In what has become a quarterly ritual, Freddie Mac on Thursday reported record fourth-quarter earnings while shrugging off the danger of political risk this year.

Fourth-quarter net income rose almost 12% from a year earlier, to $663 million, or 89 cents per diluted common share, hitting analysts' estimates. Full-year net income grew 15%, to $2.547 billion, as did per-share earnings, to $3.40. It was Freddie's 30th consecutive year of profitability, and the 19th straight that its returns on common equity exceeded 20%.

"Our earnings were driven by solid volume growth with stable margins and continued improvement in credit," Bill Stephens, vice president for shareholder relations, said in an interview.

Despite a slowing economy, Mr. Stephens predicted that 2001 will be a good year for Freddie. He added, however, that he expects credit quality to deteriorate slightly from its near-perfect 2000 level.

Ken Posner, an analyst with Morgan Stanley Dean Witter, said the current economic climate is "perfect storm weather" for Freddie Mac and its larger sibling, Fannie Mae. A budding refinance boom promises to accelerate their portfolio growth, he said, while big commercial banks, which are the government-sponsored enterprises' primary competitors, are less likely to bulk up on mortgages because they are struggling with commercial credit problems.

To be sure, the economy is not the only storm cloud on the horizon. Freddie and Fannie saw their share prices seesaw last year when congressional critics called for regulations tightening oversight of the two GSEs.

Critics were buoyed by a high-ranking Treasury official's support for eliminating the $2.25 billion lines of credit that the GSEs maintain with the Treasury. Investors perceive the credit lines as implicit proof that the government would bail out the GSEs in an economic crisis, critics say.

In addition, Rep. Richard H. Baker, R.-La., who led the reform campaign, has expressed interest in consolidating regulation of the GSEs - now split between the Office of Federal Housing Enterprise Oversight and the Department of Housing and Urban Development - and making the new regulator independent from the congressional appropriations process.

The GSEs are more amenable to such a regulatory change than they are to eliminating the credit lines; Fannie Mae has said that creating a new regulator would not impact its share prices.

Fannie and Freddie struck a truce in October with Rep. Baker and promised to provide additional disclosures and to issue subordinated debt.

Though the GSEs clearly hoped the October agreement would appease Rep. Baker, he has not set out his legislative agenda for this year, and his office has made clear that it will consider all the points that he advocated last year - including the elimination of the credit lines. He is also slated to preside over a more powerful financial services subcommittee this year, which holds jurisdiction over the GSEs.

Mr. Stephens passed off last year's events as "a large educational process with Rep. Baker and the regulatory community."

This year will be "a little less noisy than 2000," according to Gary Gordon, an analyst with UBS Warburg, who added that the only change he foresees would be giving the GSEs a new regulator. "I wouldn't be surprised to see that structure change," he said.

Changing the GSEs charter by eliminating the credit lines is a far more important issue, said Mr. Gordon, but he added that he does not believe anything will be accomplished on that issue.

Mr. Posner said he thinks most of the year's political risk will only be headline risk, arguing that Fannie and Freddie are low on the new administration's list of priorities.

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