I think Freddie Mac's (NYSE:FRE) plan for announcing second-quarter earnings may have been to snowball analysts and investors with an avalanche of data that included a press release, 24 pages of financial statements and tables, a six-page appendix, and a 51-page presentation. I'm only half-joking. One of the Freddie executives on the conference call said at least twice that they weren't going to apologize for providing that much data, sounding oddly defensive.

Despite that, one number remained prominent: Freddie disappointed Wall Street with a net loss of $1.63 per diluted common share, which exceeded even the most pessimistic analyst's forecast. That loss may not be wholly representative, I'll grant you, since some of the reserves and mark-to-market losses on the securities portfolio may ultimately reverse.

Risk on top of risk on top of risk ...
But still, if you own Freddie Mac shares, your problem is that no one knows what those ultimate losses will be. And that's just one source of significant uncertainty surrounding Freddie and its big sister, Fannie Mae (NYSE:FNM).

Sure, the Treasury has hired Morgan Stanley (NYSE:MS) to provide an analysis of the government-sponsored entities' (GSEs) risk and capital structure, but Secretary Hank Paulson's role is to ensure the stability of the financial system and protect the U.S. taxpayers' interests, not those of shareholders.

(Given Morgan Stanley's record managing its own risk profile in the current crisis, Goldman Sachs (NYSE:GS), JPMorgan Chase (NYSE:JPM), or BlackRock (NYSE:BLK) might have been a better choice, but Goldman and JPMorgan Chase are already advising Freddie on its capital position.)

No matter how outrageously cheap Freddie Mac's stock looks (it's trading at barely more than one times next year's earnings if you believe the most optimistic analyst estimate), this is a purely speculative situation and the risk of a total capital loss cannot be excluded. With regulatory risk compounding financial risk, those who choose to walk into this labyrinth are too clever for their own good.

The GSE business model is kaput
One perspicacious analyst on the conference call asked what I consider to be the fundamental question (but one which was unlikely to receive a candid answer): Is the shareholder-owned GSE model, which balances a public policy mission and a responsibility to private shareholders, now unsustainable?

Freddie Mac CEO Richard Syron answered that, although it is currently "stressed," the model remains viable. I think that's nonsense. I wrote recently that the shareholder-owned GSE model is inherently unsound. While I think the present crisis should have made that clear to any fair-minded observer, it is very far from being a consensus (or even a mainstream) view.

If you're thinking of speculating on Freddie Mac shares, that's fine. Just don't fool yourself into thinking you're investing.

Related Foolishness:

Alex Dumortier, CFA, has no beneficial interest in any of the stocks mentioned in this article. JPMorgan Chase is a Motley Fool Income Investor recommendation. Try any of our Foolish newsletters today, free for 30 days. The Fool has a disclosure policy.