Things That Make You Go Hmm

The bill has a provision directing the Secretary provide "financial assistance" to banks taking losses from positions the preferred of the GSEs (FNM and FRE). Interestingly, banks from Massachusetts -- Chairman Frank's state -- are disproportionately represented among such banks.

Coincidence?

The bill's position on the preferred:
"Section 103
In exercising the authorities granted in this Act, the Secretary shall take into consideration—. . .

(6) providing financial assistance to financial institutions, including those serving low- and moderate-income populations and other underserved communities, and that have assets less than $1,000,000,000, that were well or adequately capitalized as of June 30, 2008, and that as a result of the devaluation of the preferred government-sponsored enterprises stock will drop one or more capital levels, in a manner sufficient to restore the financial institutions to at least an adequately capitalized level;"

The position of Massachusetts banks in the preferred:
"About a quarter of the nation's banks lost a combined $10 billion to $15 billion in the wake of the federal government's takeover of mortgage giants Fannie Mae and Freddie Mac, a new industry survey found. In the survey, the American Bankers Association reported that 27% of the nation's 8500 banks held preferred shares in Fannie and Freddie in their investment portfolios. The shares are expected to be worthless. The survey found that 85% of the affected institutions were community banks -- those with less than $1 billion in assets. Many were located in Massachusetts, followed by Illinois, Connecticut, South Carolina and Virginia.

". . . The banks are asking for the government to consider paying "a reasonable level" of dividends on Fannie and Freddie preferred stock to preserve some of the shares' value.

". . . It's not clear why so many banks that held the preferred stock were in Massachusetts. Daniel Forte, president of the Massachusetts Bankers Association, noted that the state has more than 200 banks, an unusually high number compared with most other places that have seen more consolidation."

WSJ, 9/23/2008