Final answer:
The primary activity of Freddie Mac is to buy and pool blocks of conventional mortgages, which involves purchasing mortgages from lenders, pooling them into mortgage-backed securities, and selling them to investors to increase housing market liquidity.
Step-by-step explanation:
The primary activity of Freddie Mac is to buy and pool blocks of conventional mortgages. This action is part of their role in the secondary mortgage market, where they increase the availability and affordability of homeownership in the United States. Freddie Mac purchases mortgage loans from various lenders, pools them, and then issues mortgage-backed securities. This business model allows lenders to replenish their funds which they can use to lend to more homeowners, hence increasing the liquidity of the mortgage market.
It is important to note that Freddie Mac is a government-sponsored enterprise (GSE), but it does not guarantee mortgages with the full faith and credit of the federal government, as that role primarily lies with other entities such as Ginnie Mae. Freddie Mac and its counterpart Fannie Mae were both placed under government conservatorship during the 2008 financial crisis to stabilize the mortgage market. As a result, they received federal support but they are not fully government-backed as they operate in the secondary mortgage market as publicly traded companies.
Actions taken during the financial crisis, such as the federal bailouts of Freddie Mac and Fannie Mae, were among the emergency measures to ensure the stability of the financial system. The Federal Reserve also purchased significant amounts of mortgage-backed securities from these GSEs during the quantitative easing programs to provide additional liquidity and support to the market.