US ‘likely to recapitalise’ Fannie, Freddie

The US Treasury is growing increasingly likely to recapitalise Fannie Mae and Freddie Mac in the months ahead on the taxpayer’s dime, Barron’s said in its Aug 18 edition, reports Reuters. Such a move could wipe out existing holders of the agencies’ common stock, with preferred shareholders and even holders of the two entities’ $19bn of subordinated debt also suffering losses, said the US financial weekly. Barron’s reported that the infusion would take the form of a preferred stock with such seniority, dividend preference and convertibility rights that Fannie’s and Freddie’s existing common shares “effectively would be wiped out, and their preferred shares left bereft of dividends.”