gatewayast

Fannie and Freddie: Finally a Light at the End of the Tunnel?

It is becoming clearer each day that pushing the preferred shareholders of both FNM & FRE (most of whom were banks not individual shareholders, except our clients) in front of the train had some unanticipated consequences including making the dire capital situation for quite a number of banks even worse and also making it virtually impossible for them to go back to the preferred stock capital markets well leaving many of them going down the stream rapidly without a paddle or even a life vest. Not a pretty picture!. Hence there may be some rethinking of the preferred issue, especially after the election.

Trading Patterns in Fannie/Freddie Common and Preferred Shares

There is also a huge political issue here that hasn't totally been exposed but I think will be shortly which largely revolves around the preferred stocks. With the exception of the banks which purchased significant amounts of these the rest were bought ("sold"?) to older conservative, mostly retired income oriented investors. How can the government suggest that the banks who owned these preferred will be "helped" by regulators while the retail investor in these gets nothing?
Christopher Dodd, Chairman of the Senate Banking Commission and also a resident of CT. where we are located has already indicated he wants to raise that issue. He certainly doesn't want a bunch of pissed off voters in Fairfield County. I would suspect the same issues are also facing the Senators from both New York and Florida. Time will tell.
Politics makes strange bed fellows not always economic sense.

JB