15 years into Conservatorship, Glen Bradford-LuLeVan still talks about their capital structure and even he says it wrong, because with today's $125B Net Worth and $318B SPS LP still outstanding, the JPS are wiped out, whereas the Cs are still necessary in order to monetize the remaining SPS after the corresponding 61% haircut.
Both haircuts boost the common stock valuation.
Known investors in preferred stocks, like Berkowitz, see a non-cumulative dividend Preferred Stock as a tool for the assault on the ownership of enterprises, instead of what this made-up hybrid financial instrument was meant to do: recorded in Core Capital due to its loss-absorbing capacity, Capital Adequacy-wise (by definition, like all other accounts therein). In other words, they are used by the financial companies to restore capital with the dividend suspended.
This is why the JPS get a higher dividend rate than the interest rate on similar obligations by the same issuer.
Bank CEOs play along, because these costly JPS are never redeemed, and they repurchase common stock instead, which is wrong too, because this is done when they don't know where to invest in their business.
But, for instance, $JPM with $116B worth of Treasury Stock (stock buybacks) on its balance sheet (a contra-equity account) that, once retired, it reduces the core capital (both Additional Paid-In Capital and Retained Earnings accounts), is beyond not knowing where to invest in.
At least, it should have repurchased its $27.4B worth of JPS instead.
It isn't a compensation to the shareholders because they rather see a 20% ROE on that amount, than a CEO, wannabe hedge fund manager, investing in the stock market.
The point is, there's been a Separate Account plan all along, in accordance with the law. Now it's when the JPS's fair value is their par value.
