Sovereign Could Feel Fannie, Freddie Pain

Sovereign Bancorp(SOV Quote) could be facing significant losses on its preferred stock investments in Fannie Mae(FNM Quote) and Freddie Mac(FRE Quote).

With concerns brewing that the U.S. government will privatize Fannie and Freddie because of their lack of adequate funding, debt holders of the two mortgage giants who are senior in the capital structure will likely see their investments protected.

However, the fate of common and preferred stockholders is much less certain, and in a worst-case scenario both could be wiped out, seeing their investments fall to zero. ...