Freddie Mac Does it Again

Investment losses on Freddie Mac and Fannie Mae have been punching holes in other companies' earnings for a while now, but today one of the mortgage lenders took a bite out of expectations for the S&P 500 index at large.

Today for the first time, it's projected that third-quarter earnings for the S&P 500 will decline from year-ago levels.

Estimates have been sinking for months, but overnight Thomson Reuters' consensus fell more than a percent—from +0.3 percent to -0.8 percent. If you guessed Lehman Brother's massive loss is to blame, you'd be wrong: The real culprit was Freddie Mac.

How does that work? It's simple (though depressing) math.

Last night, Freddie Mac and Fannie Mae were removed from the S&P 500 as a result of the companies being taken into conservatorship by the government. Unfortunately, the S&P 500 also lost what was expected to be a huge improvement in Freddie's bottom line. For the third quarter, Freddie is expected to lose only 85 cents a share. That's not something you write home about, but it beats the heck out of the $3.29 a share Freddie lost in the third quarter of 2007.

Getting back to Lehman, its estimated loss of $3.9 billion, or $5.92 a share, for the third quarter hasn't worked its way into the consensus earnings estimate. Only a couple of analysts have updated their numbers, so the Thomson Reuters consensus still stands at a loss of $3.65—or more than two dollars above Lehman's best guess. Look out below.

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