Wall Street analysts have said that Freddie Mac (NYSE: FRE) would not be able to get by without raising money. Its losses from the current mortgage crisis have simply been too great. At one point it looked like the Fed would open its doors to provide the company loans and Treasury would buy stock in the company.

According to The Wall Street Journal, Freddie "is considering raising capital by selling as much as $10 billion in new shares to investors."

After a sharp sell-off in its stock, Freddie has watched its shares move up over 50% in two days because investors believed the government help would keep the firm from becoming insolvent. Now that the value of the stock is somewhat higher, it may turn out to be a good time to get some cash in the barn.

But, the company's shareholders are likely to take a brutal beating. Freddie's market cap is only $6 billion, so the dilution of bringing in $10 billion would be stupendous. The move could certainly push the stock down to the $4 level over time, unless the company can post results well above what analysts expect and push the current share price way up.

Of course, the shareholders are not to blame, but they will be left holding the bag. Freddie management bet that it could get better returns on its portfolio by getting into risky investments and were burned like most banks and brokerage houses.

No matter how poor their judgment was, management will probably keep their jobs. Maybe they will even get a fat bonus for raising the new capital.

Douglas A. McIntyre is an editor at 247wallst.com.