taxbaby

Why Do Regional Banks Hold Fannie and Freddie Preferreds?

see the excellent Bloomberg article,
www.bloomberg.com/apps... which states in part,

Banks bought Freddie and Fannie preferred stock because they can be used as capital that regulators require to cushion against losses on loans. Banks also get a tax break on 70 percent of the securities, making them attractive to own, said Midwest's Wiest.

``These are the only two companies that the regulators have allowed banks to hold in their portfolios,' Wiest said. ``Everybody knows we have them. It seems like every bank has them.''

Today, Lehman noted the following recent disclosures of
preferred GSE stock holdings:
JPM ($1.2 bln), FITB ($55 mln), MTB ($162 mln), and USB ($79 mln).

The Bloomberg article says Sovereign Bank holds $632 mln.