Pat
Great
That is the stat I have been looking for
50% - 18 Billion - bye bye?
$36 billion in Fannie and Freddie preferred stock was outstanding prior to the conservatorship. About half is owned by mutual funds, hedge funds, insurance companies, pension funds, and individual investors. But the other half is held by the banking sector and is counted as Tier 1 capital. That capital, which helps determine the amount of lending a bank can undertake, is now at risk. Small, rural and community banks, who were encouraged by bank regulators to buy about $6 billion of Fannie and Freddie preferred stock prior to the conservatorship, are particularly vulnerable.
As far as I know - from articles at the time - banks could not hold any one company's pfd shares beyond 5% of total to have it count towards Tier 1 capital. AT SAME TIME - for x years - the rules made an exception for F and F preferreds. The exception said that a bank could hold as much F and F preferreds as it wanted and all of it counted towards Tier One Capital
When Paulson announced the action that drove the preferred shares down down down - he specifically commented on the preferreds held by a ton of smaller banks. His comment (I love it) was --- We will deal with that on a case by case basis. That was his answer and as the full article notes that meant some banks failed.