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164 comments on Freddie Mac/Fannie Mae bailout: Guess Who Wins
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164 comments on Freddie Mac/Fannie Mae bailout: Guess Who Wins
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yes and no. The hit is immediate, because the likelihood of future warrants being exercised is high, but they haven't actually been exercized yet. It's just the diffrerence between an event that has happened, and one that has not, but is highly likely to. Both will get a similar rating, but the event has happened in one case and not yet in the other.
The preferred stock will be widely held within the US, including being held by regional banks (those least affected by sub-prime???). Those banks must now write down their stock holdings.
I don't know if this conservatorship will qualify as nationalisation, but if it does, and I see no reason why not, then it will triger default on any FMFM CDS (credit default swaps).
Previous interventions have had the effect of boosting the stock market for a while, not permanently since there are no real changes to the business practises.
This won't help anyone struggling to meet their mortgage repayments. IMHO it is a bail-out for investors in the bonds most notably the non-US investors who were threatening to dump these bonds.