I'm surprised I couldn't hear the scream from McLean, Va. That's the headquarters of Freddie Mac (NYSE:FRE), which today released one of the ugliest housing-bust earnings stories since the bad old days (weeks ago) of Citigroup (NYSE:C), Merrill Lynch (NYSE:MER), and Morgan Stanley (NYSE:MS).

How's this for crummy? Freddie had to increase its provision for credit losses by some $1.2 billion to account for the lousy credit and housing markets. On top of that, toss in $3.6 billion in mark-to-market losses on interest-rate and credit-related items.

That added up to a $2 billion loss, or negative $3.29 per diluted share -- more than double the red ink from the 2006 quarter. Moreover, Freddie management said it expects things to get worse before they get better. Oh, and there's this little (major) problem as well. All those GAAP markdowns depress what Freddie refers to as its "regulatory core capital," meaning there's less spare money to throw around in order to generate returns for shareholders. That's bad, folks.

It's so bad that Freddie is hiring Goldman Sachs (NYSE:GS) and Lehman Brothers (NYSE:LEH) to beat the bushes for more moolah. Also, it's "seriously considering" halving the dividend. Surprise!

Depending on how you read the tea leaves from here, today's near-30% drop is either the start of a long downhill slide, or the deal of a lifetime. Freddie's mortgage book is clearly stouter than many, and it calculates that it's reserved against losses sufficient to insulate it from a housing debacle twice as severe as what it experienced in 1991. If that sounds good to you, you may want to take a look at just how bubbly the last housing market got before consumers could no longer afford to keep inflating it.

Throw in a bit of a recession to rattle loose the good credit risks along with the bad, and losses could very easily get twice as bad as they were in the early '90s, leaving Freddie unable to reclaim all the recent writedowns. The company's apparently taking pains to emphasize the plausibility of that scenario, judging from the conference call. And if you're at all interested in Freddie or cousin Fannie Mae (NYSE:FNM), today's conference call is a must-read.

These are businesses so complex, and so dependent on opinions about what stuff may or may not be worth, that only a real alchemist could boil down a fair value. Even the analysts who follow this biz are throwing up their hands in exasperation, as evidenced by the caller who told management, "Just the definitions of these accounting charges are mind-boggling."

If you want to buy a pig in a poke, have at it. Me, I prefer to bid on swine in the pen. At least that way I can see most of the dirt.

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At the time of publication, Seth Jayson, a top-10 CAPS player, had no positions in any company mentioned here. See his latest CAPS blog commentary here. View his stock holdings and Fool profile here. Fool rules are here.