Individual investors and mutual funds are not the only ones who have been burned on the stock price drops at Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). JP Morgan (NYSE: JPM) reported Monday that it has lost $600 million on its investment in the two companies. According to Reuters, the big bank holds preferred stock in the mortgage firms.
The news begs the question of what other banks have similar investments and how much losses from these investments will damage their earnings?
Banks are in enough trouble due to subprime paper holdings, LBO debt and credit card loan pools. Holdings in the mortgage agencies could add enough on the pile to hurt third quarter earnings and cause losses for some firms.
Investors have yet another reason to stay away from bank stocks.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
8-26-2008 @ 10:07AM
David said...
The $600 million dollar loss couldn't happen to a nicer bunch of people. I'll bet there is much more of this crap out there. Get ready for a government bailout of the preferred shares of Fannie and Freddie.