I’ve mentioned recently (including in this Money and Markets piece) that the falloutfrom Fannie Mae and Freddie Mac is spreading far and wide. For instance, many banks and financial instiutionshold preferred shares issued by the two Government Sponsored Enterprises. There are a lot of questions about howthose preferreds would be treated in any bailout. But what is not in question is that the value of the GSEs’preferred shares has fallen sharply. Today, another institution quantified the impact that’s having. From JPMorgan’s8-K filing:
“JPMorgan Chase & Co. disclosed today that it held approximately $1.2 billion par value of Fannie Mae and FreddieMac perpetual preferred stock. Such securities are held in the Firm’s investment portfolio and are marked to marketthrough the Firm’s earnings. The Firm estimates that such preferred stocks have declined in value by approximately anaggregate $600 million in the third quarter to date, based on current market values. The precise amount of losses thatmay be incurred on these securities for the third quarter is difficult to determine, given the significant volatilitybeing experienced in the market values of these securities.”
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