JPMorgan's GSE Preferred Loses Half of Value

JPMorgan Chase & Co. has declared in a new regulatory filing that the value of its Fannie Mae and Freddie Mac perpetual preferred stock has fallen by half, to $600 million. The bank/investment bank offered few other details about its holdings, and at deadline time a spokesman had not returned a telephone call about the matter. JPMorgan holds $1.2 billion in the preferred stock of the government-sponsored enterprises. It says the precise loss it will book in the declining investment "is difficult to determine, given the significant volatility being experienced in the market value of these securities." Meanwhile, Philadelphia-based Sovereign Bancorp, which owns $899.5 million in Fannie Mae and Freddie Mac preferred stock, has taken $280 million worth of "other-than-temporary" charges on that investment since the fourth quarter of 2004. These charges have been subtracted from earnings. Once the shares are placed in the other-than-temporary category, Sovereign cannot "mark up" the value of the preferred shares unless the share price recovers and it sells the stock.