Josh Stern

A Closer Look at the Treasury's GSE Preferred Stock Purchase Plan

deadwood, I believe we are "bailing out" the GSEs primarily to keep the spread between 10yr. T-bonds and mortgage backed securities from further widening, possibly by a lot, which would result in higher mortgage rates and even larger declines in home prices than what will otherwise occur, resulting in even more homeowner defaults and bankrupt financial institutions.

What you point to I believe is a risk of doing this, that T-bond yields will rise and the U.S. currency will decline

A Closer Look at the Treasury's GSE Preferred Stock Purchase Plan

Oops, typo. I meant to write above that it always seemed obvious to me that the govt's implicit guarantee for the GSE's would apply to the debt and *not* the shares, or at least the debt in preference to the shares.

A Closer Look at the Treasury's GSE Preferred Stock Purchase Plan

Where I can find estimates of the absolute and relative amounts of GSE preferred, common, and debt that is held by various financial institutions?

I'm a little surprised by Patsy's suggestion above that U.S. banks hold a lot of preferred stock relative to the size of their GSE debt holdings, and I'd like some pointers to research on this topic.

Beyond that, I'll offer that it always seemed obvious to me that the govt's implicit guarantee for the GSE's would apply to the debt and the shares. I'd have a hard time imaging it otherwise no matter who were the holders of each type. But if it was actually true that banks currently hold a lot of preferred relative to their debt offerings that would be worrisome.