Well, it looks like those that hold Fannie and Freddie's preferred stock will be out of luck, as well. This will be particularly hard on some of the banks, who bought lots of this type of stock. This is not what the banks need at this juncture.
From The Market Ticker...
Bullet points:
- Both common and preferred stock dividends eliminated (not deferred)
- GSE portfolios will run down starting in 2010, 10% annually, until at a "safe" level (unspecified)
- Modest growth in MBS portfolio in 2009
- Capital limits eliminated (since Treasury now must pony up whatever is required)
- Treasury to buy some MBS as necessary "temporarily" (only new MBS, however - no existing ones. If the new underwriting standards are so good, how come they need to purchase them?)
- Senior and subordinated corporate debt will be guaranteed (despite the black letter wording on the face that says its not); no guarantee on existing MBS that were written prior to this date.
- Treasury will buy as much preferred stock as necessary to maintain a positive net worth of the firms
- Establishment of a new secured lending facility to Freddie, Fannie, and the Federal Home Loan Banks (the latter is an ugly situation that has not been recognized by the market - at all - so far)
- Preferred issued to Treasury will have a 10% coupon; that ought to leave a mark.
- US Government gets warrants for 79.9% ownership interest; both common and preferred are, essentially wiped out.
- Statement that "if you're a bank and got just skulled in both eye sockets, please call us." Oh, and everyone else? Too bad. Niiiiice.
- Will take on 20 billion a month in debt to the US Taxpayer to fund all of the above, plus whatever else is required.
All authorities and activities expire in December 2009
Read entire article here http://market-ticker.denninger.net/archives/572-Bend-Over,-Here-It-Comes-FraudiePhoney.html
