by Bill McBride on 9/07/2008 11:08:00 AM
Sunday, September 07, 2008
Treasury has taken three additional steps to complement FHFA's decision to place both enterprises in conservatorship. First, Treasury and FHFA have established Preferred Stock Purchase Agreements, contractual agreements between the Treasury and the conserved entities. Under these agreements, Treasury will ensure that each company maintains a positive net worth.
With this agreement, Treasury receives senior preferred equity shares and warrants that protect taxpayers. Additionally, under the terms of the agreement, common and preferred shareholders bear losses ahead of the new government senior preferred shares.
[C]onservatorship does not eliminate the outstanding preferred stock, but does place preferred shareholders second, after the common shareholders, in absorbing losses. The federal banking agencies are assessing the exposures of banks and thrifts to Fannie Mae and Freddie Mac. The agencies believe that, while many institutions hold common or preferred shares of these two GSEs, only a limited number of smaller institutions have holdings that are significant compared to their capital.
The second step Treasury is taking today is the establishment of a new secured lending credit facility which will be available to Fannie Mae, Freddie Mac, and the Federal Home Loan Banks.
Treasury is initiating a temporary program to purchase GSE MBS.Fact Sheets from Treasury:
FHFA Director Lockhart Remarks on Housing GSE Actions
Fact Sheet: FHFA Conservatorship
Fact Sheet: Treasury Preferred Stock Purchase Agreement
Fact Sheet: Treasury MBS Purchase Program
Fact Sheet: Treasury GSE Credit Facility
Posted by Bill McBride on 9/07/2008 11:08:00 AM