DBRS: GSE Preferreds Will Not Sink Banks
Ratings agency DBRS says that despite the sinking market for Fannie Mae and Freddie Mac equity securities, most U.S. banks have limited exposure to writedowns related to the preferred stock of the government-sponsored enterprises.
The fear is that the approximately $36 billion of their preferred stock that is outstanding could lose more or all of its value in a bailoout scenario.
Already, many banks have recorded "other than temporary" impairment to the value of their GSE preferred stock holdings. While banks and insurance companies own GSE preferred stock, DBRS said that - at least within its rating universe - bank exposure to the preferred stock "is not material and will not adversely impact current ratings." Less than 10% of DBRS-rated banks have preferred exposure of more than 2% of their tangible equity. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/