Freddie Mac

undefined

rose 5% after setting plans to buy back up to $2 billion in common stock and to issue up to $2 billion in preferred stock.

The McLean, Va., mortgage company said the moves would have no impact on its ability to maintain a capital surplus. The company said it got the permission of its overseer, the Office of Federal Housing Enterprise Oversight, to make the moves. Freddie has been asking OFHEO for permission to make changes regarding its capital standing ever since the company was laid low by a 2003 accounting scandal that resulted in a $5 billion restatement and a $125 million fine.

Freddie's government-sponsored bigger sibling,

TheStreet Recommends

Fannie Mae

undefined

, is in the midst of restating its own books. Both companies have been forced to change their accounting for the derivatives contracts they use to hedge against the risk of holding huge mortgage-backed securities portfolios.

"This is a first step in managing our capital position to generate better value for shareholders, while at all times remaining well capitalized and well positioned to take advantage of market opportunities," said CEO Dick Syron. "As we move forward, the board and management will continue to focus closely on the company's capital management."

On Wednesday, shares of Freddie rose $2.52 to $58.08.