Fannie Mae has more than 600 million shares of preferred stock outstanding. Freddie Mac have about 460 million shares outstanding. Preferred stocks pay a high dividend and companies buy them for the relatively safe, consistent cash payouts they offer.
There is much concern now because the preferred shareholders are basically the banks and insurance companies. And no one is clear whether they would see their dividends if the tax payer was forced to step in such a massive way.
The financial industry takes another big hit because of all of these institutions are part of the same fabric. If it begins to sound like a house of cards...it is.
Congress estimates a government rescue of Fannie and Freddie could cost taxpayers $25 billion, with the exact amount based on how far the U.S. housing market falls.
Its becoming clear that some parts of the American financial system have ceased to function. The Japanese real estate crises in the 1980's was a huge implosion much like this one. Although great amounts of wealth were lost and markets never completely recovered, they still remained the #2 economy. And so we will weather this too. Amen
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