CR covers the FDIC: Federal Banking Agencies React to Takeover of Fannie Mae and Freddie Mac
Yves at Naked Capitalism is pondering the bank fallout:
Bye Bye Banks: Freddie and Fannie Preferred Holders to Take Big Hits?
CR has the Statement by Paulson on Fannie and Freddie
Read what seattlebubble bloggers are saying in the Econ forum
and this from Peter at LA Land
Obama and McCain back Fannie-Freddie bailout; Palin calls them “too big.”
Fact sheets from the US Treasury:
FHFA Director Lockhart Remarks on Housing GSE Actions
Fact Sheet: Treasury Preferred Stock Purchase Agreement
Fact Sheet: Treasury MBS Purchase Program
Fact Sheet: Treasury GSE Credit Facility
Wall Street Journal
US Outlines Fan Fred Takeover
New York Times
US Unveils Takeover of Two Mortgage Giants
US Takes Over Fannie Freddie
Conservatorship doesn’t kill preferred stock. Instead, it puts common shareholders first in line to absorb the losses. Preferred shareholders are second in line to absorb losses. Under the terms of the agreement, common and preferred shareholders bear losses ahead of the new government senior preferred shares.
From the FDIC website:
The federal banking agencies have been assessing the exposures of banks and thrifts to Fannie Mae and Freddie Mac. The agencies believe that, while many institutions hold common or preferred shares of these two government-sponsored enterprises, a limited number of smaller institutions have holdings that are significant compared to their capital.
The Federal Reserve Board…are prepared to work with these institutions to develop capital-restoration plans pursuant to the capital regulations and the prompt corrective action provisions of the Federal Deposit Insurance Corporation Improvement Act.
All institutions are reminded that investments in preferred stock and common stock with readily determinable fair value should be reported as available-for-sale equity security holdings, and that any net unrealized losses on these securities are deducted from regulatory capital.
They’ve also put together a new secured lending credit facility which is available to Fannie Mae, Freddie Mac, and also the Federal Home Loan Banks. (Wait, what? I didn’t know the FHLBs were in need of this.)
Also, the U.S. Treasury has put together a temporary program to buy GSE MBS.
The taxpayers have now become the lender of last resort and the taxpayers have bailed out Fannie and Freddie.
I’d like to know more about what both presidential candidates think about all this, and I’d like to see film footage of Paulson. If anyone finds some more great links as Hurricane Fan Fred hits the US taxpayers, please post them in the comment section. Rhonda what do you think this might do for interest rates?