Freddie and Fannie Hammer Regional and Small Banks

Moody’s ratings downgrades of Freddie and Fannie preferred last week are going to be bad news for insurance companies and regional and small banks who are believed to have large holdings in approximately $36 billion of these securities. As the financial leadership sends more and more signals that Freddie and Fannie are likely to be nationalized, will this mean that the preferred stock gets wiped out along with the equity? Very possibly. For more, see our story picks in “Mortgage Markets” this week.