JP Morgan Takes A $600 Million Writedown In Fannie and Freddie Preferred

By Bess Levin

JP Morgan Chase estimated that its holdings of Fannie Mae and Freddie Mac preferred stock lost about half of their value the third quarter now underway, according to a regulatory filing with the Securities and Exchange Commission. JP Morgan says it owns preferred shares of Fannie and Freddie with a $1.2 billion par value that has been written down by $600 million.
“The precise amount of losses that may be incurred on these securities for the third quarter is difficult to determine, given the significant volatility being experienced in the market values of these securities,” JP Morgan notes.
This move should also trigger writedowns at other financial firms, including regional banks and insurers, who hold the majority of Fannie and Freddie preferred shares.
JP Morgan 8-K [SEC]

Comments (9)

  1. 1
    Posted by guest | August 25, 2008 at 2:41 PM

    No conflict of interest here huh?
    I bet boys at JPM are thinking about the best interest of all investors (and taxpayers) as they advise FNM/FRE.

  2. 2
    Posted by guest | August 25, 2008 at 2:42 PM

    I thought Morgan Stanley was advising the Treasury on Fannie and Freddie.

  3. 3
    Posted by guest | August 25, 2008 at 2:57 PM

    @2 — yes, but @1 was clearly saying that since JPM and MS used to be the same firm 100 years ago then the mixed bloodlines obviously create a conflict of interest. DB readers are nothing if not sharp.

  4. 4
    Posted by Anal_yst | August 25, 2008 at 2:58 PM

    #2 is correct but i’m sure others will see conflict btw the treas/fed and JPM regardless…

  5. 5
    Posted by guest | August 25, 2008 at 3:08 PM

    agree agree.
    But the best conflict of all is between FED and Treas. It will be interesting to see how it plays out.
    Do we go the Japan route? Or the short, sharp shock route?

  6. 6
    Posted by AJ | August 25, 2008 at 3:23 PM

    @5 I’m voting for instituting “stocks must always go up” and ignoring the problem

  7. 7
    Posted by guest | August 25, 2008 at 3:52 PM

    The preferrds are down more than 50% on the year – i.e. JPM added to a loosing position.
    @5 Japan, but with more social / cultural angst.

  8. 8
    Posted by guest | August 25, 2008 at 10:12 PM

    Sorry, but I think you’re dignifying No. 1′s remarks with more intelligence than he or she had. Someone simply confused JP Morgan with Morgan Stanley. There’s no conflict.
    JP Morgan wrote down $600 million in preferred stock losses today. There are plenty of other banks and insurance companies holding FM/FM preferred stock that are staying silent for the time being.
    Some say that Merrill Lynch cannot afford its ARM buy-back. How much FM/FM preferred stock does it hold, and what is its new write down going to be?

  9. 9
    Posted by guest | September 9, 2008 at 6:06 PM

    DOES BESS LEVIN EXIST???? CAN WE GET TO THE BOTTOM OF THIS ALREADY!!

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