I feel like a kid at christmas time waiting for this news to cross the tape sometime between now and sunday night. Come on already, im getting really impatient...
I can give you a likely 60 minute timeframe: between 6pm ET and 7pm ET on Sunday, similar to the March BSC announcement and the July GSE announcement
The latest from Bloomberg: http://www.bloomberg.com/apps/news?pid=20601087&sid=aMX336c2lWGQ&refer=home quotes Barney Frank: Frank said the federal government will take a senior repayment position to ``all shareholders, preferred and common.'' The Treasury is ``going beyond no dividends, I believe, in terms of what's going to happen to the shareholders,'' Frank said. ``I think shareholders are going to find themselves in a very subordinate position.''
http://www.iht.com/articles/2008/09/06/business/07fannie.php "Indeed, one person briefed on the company's finances said Freddie Mac had made accounting decisions that pushed losses into the future and postponed a capital shortfall until the fourth quarter of this year, which would not need to be disclosed until early 2009. Fannie Mae has used similar methods, but to a lesser degree, according to other people who have been briefed." Well that sure helped them... So the question is, how many other financial entities have done the same, and just what are we going to find out come 2009.
If they wipe out preferreds, the ones the insurance and banks own, 36 billion dollars worth or so, how is that going to help the financial market?
If the preferreds are wiped out, it won't help the banks and insurers that own them. That's a good thing. It's ridiculous that banks and insurers can expect to get all the upside in the preferred stocks and then expect the government to bail them out when the GSEs are shown to be insolvent.
Looks like Paulson is in panic mode. The credit markets have locked up. As the article states ...."Fannie and Freddie are the only significant buyers of mortgages at the moment. If they are prohibited from using their capital to buy and hold more loans, they would be less able to provide money for the housing markets." No wonder WAMU is offering CDs at 5%.