Fannie, Freddie Get More Hedge Fund Love
Kashkari was somewhat more sympathetic to the argument that small banks had initially been encouraged by the government to buy Fannie and Freddie preferred securities before eventually getting wiped out on these investments when the Treasury decided to stop paying their dividends.
"I can understand that perspective, but everything had a timing and a sequencing," he said, before adding, "No one was making any promises that those [Fannie and Freddie preferred shares] had the full faith and credit of the government. [Those banks] could have bought Treasuries."
Kashkari said that while he "hasn't studied" the question about whether the preferred shares may eventually recover their value, he would be "very surprised if they're worth anything," since they still owe the government more than $150 billion between them.
"The Federal government still looks like it's going to take a net loss, which means shareholders should get wiped out completely."-- Written by Dan Freed in New York.
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