Wachovia Dumps $509M of GSE Preferred

Wachovia Corp., Charlotte, N.C., has announced the liquidation of its $509 million of government-sponsored enterprise preferred stock at a pretax loss of $171 million. The sales, completed July 21, were part of the company's effort to reduce leverage on its balance sheet, Wachovia said. It did not say whether the preferred shares were in Fannie, Freddie, or both GSEs. Several other banking companies have disclosed financial hits on GSE preferred stock since the seizure of Fannie and Freddie was announced Sunday. Wachovia also said it had sold about $1.3 billion of auction-rate securities that it had repurchased under settlements with regulators. When it announced the settlements in August, the $812.4 billion-asset Wachovia estimated that about $8.5 billion of the bonds were eligible for repurchase and that, after redemptions and planned sales, it would hold about $3.1 billion of them at June 30 of next year. It had previously set aside $500 million to cover legal expenses and estimated market losses associated with the auction-rate securities.