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) -- Common shares of

Fannie Mae



Freddie Mac


on Wednesday were the big financial losers among major U.S. financial stocks.

Fannie Mae's common shares were down 28% to close at 78 cents, after rising 80% over the previous two days. Freddie Mac's common shares also sank 28% to close at 78 cents, following a gain of 71% over the previous two trading sessions.

Investors seem to buy the notion that Fannie Mae's preferred shares are a better deal than the common, as the company figures out whether it will be able to recapture a major portion of its $61.5 billion valuation allowance for deferred tax assets (DTA). That would go quite a long way toward redeeming $116.1 billion in preferred shares held by the U.S. Treasury for bailout assistance to the company.

For example, Fannie's preferred series E (FNMFM) shares were up 60% to close at $11.20, after rising as high as $17 late Thursday morning. The preferred Series E shares had risen 34% on Tuesday. The Fannie Mae preferred series E shares have a coupon of 5.10% and a par value of $50.00.

Freddie Mac's preferred series Z (FMCKJ) shares, with a coupon of 5.375% and a par value of $25, actually pulled back 1% to close at $3.16, after rising 6% on Tuesday.

Both Fannie and Freddie were taken under government conservatorship by the Federal Housing Finance Agency in September 2008. The shares of both companies have been extremely volatile since

Wall Street Journal

called attention to a filing last Thursday, when the Fannie said it would delay filing its annual 10-K report to the

Securities and Exchange Commission

, specially to consider the DTA issue.

Please see


extensive coverage of Fannie and Freddie for more about why the preferred shares are better play for investors than the common shares

by the numbers

, and for

various legal reasons


Some investors have been comparing the conservatorship and government bailout of Fannie Mae and Freddie Mac to the successful bailout of

American International Group

(AIG) - Get Free Report

, which turned out to be quite profitable for the U.S. Treasury and for taxpayers.


Dan Freed on Thursday discussed

why Fannie and Freddie differ from AIG


Antoine Gara covered the nuts and bolts of how the government structured bailout approaches for several companies, including General Motors, AIG, Fannie Mae and Freddie Mac,

keeping the door open for DTA recapture


Turning away from Fannie and Freddie, the

Dow Jones Industrial Average


was down 0.5%, while the

S&P 500

( SPX.X) and

Nasdaq Composite


indices each saw declines of 1%, as investors continued to worry over the bailout prospects for banks in Cyprus.

After several weeks of improving unemployment reports, the Department of Labor on Thursday said first-time unemployment claims for the week ended March 16 rose by 2,000 from an upwardly revised 334,000 the previous week. Still, last week's initial jobless claims came in below the average estimate of 342,000, among Economists polled by

Thomson Reuters



KBW Bank Index


was down over 1% to close at 56.47, with all but two of the 24 index components showing declines.

-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by



Follow @PhilipvanDoorn


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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.