Sovereign Bancorp's GSE Preferreds: What Was the Company Thinking?

How in the world did Sovereign Bancorp (SOV) end up with $632 million in Fannie (FNM) and Freddie (FRE) preferred?

It’s far from clear what (if anything) that paper will be worth in the event of a government bailout—yet the company owns so much that a writedown to zero would cost it a year or more of normalized earnings—exactly what the company does not need right about now.

This is what happens when you substitute blind reliance on the government and rating agencies for prudent underwriting and risk management. The people at Banco Santander must rue the day they first read the letters “SOV”. . .

Comments

[funfun:]

Simple-minded bankers!!
...funfun..

2008 Aug 26 07:16 AM

[jimsep:]

The CEO who presided over the destruction of shareholder wealth is still there. Why?

2008 Aug 26 01:34 PM

[louisme:]

sov will be big takeover by std

2008 Aug 27 12:00 PM