Sovereign Writing Down Fannie, Freddie Preferred

In a sign of how far accounting scandals at Fannie Mae(FNM Quote) and Freddie Mac(FRE Quote) can reach, Sovereign Bancorp(SOV Quote) is writing down the value of some of the mortgage firms' preferred stock that the bank owns.

The Philadelphia-based regional bank said it will incur an after-tax charge of $21 million, or 6 cents a share, in the fourth quarter for the writedown. The bank said the move will have "no impact" on earnings and expects to meet or exceed the 2004 consensus estimate of $1.66 a share.

The bank said the preferred shares of Fannie and Freddie are part of its investment portfolio. Sovereign said it's taking the charge because the market value of the stock, which pays a dividend and has bond-like attributes, has declined due to the impact of the financial scandals. ...