Freddie Mac and Fannie Mae both reported third quarter earnings this week but the numbers were in stark contrast to one another. Freddie announced a $475 million loss and set off a firestorm of reaction surrounding a possible Treasury draw when its reserves decline to zero. Two days later, Fannie posted net earnings of $2.2 billion for the third quarter. Freddie pointed to losses on derivatives used to hedge the company’s interest rate risk as the reason for its first loss in four years. In addition to falling interest rates, Freddie marked down its investment in derivatives by $4.17 million. Don Layton, Freddie’s CEO, noted that earnings volatility “stems from our usage of derivatives to...