WASHINGTON — Corporate credit union officials are reporting that the Treasury's bailout of Fannie Mae and Freddie Mac could rebound the value of mortgage-backed securities owned by the corporates.
Banks invested heavily in the government-sponsored entities' preferred stocks and are second in line behind common stock investors to absorb the GSEs' massive losses. Upon news of the takeover, all Fannie and Freddie preferred stockholder dividends have been suspended, prompting Standard & Poor's to cut their ratings to junk grade.
Thanks to regulators, corporates won't lose out; they weren't even allowed to play the game.
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