The Independent Community Bankers of America (ICBA) has urged the Treasury Department to compensate preferred Fannie Mae and Freddie Mac shareholders for the government's elimination of all dividend payments and the subordination of preferred shares.
Making whole preferred shareholders – many of which are community banks – would bolster the banks' capital and lending levels, ICBA CEO Camden R. Fine wrote to Treasury Secretary Tim Geithner on Friday.
About $36 billion in preferred government-sponsored enterprise (GSE) stock was outstanding prior to the GSEs' move into conservatorship in fall 2008. The banking sector held about $15 billion to $20 billion of the stock.
"The abrupt action by then-Treasury Secretary Henry Paulson to seize Fannie and Freddie through conservatorship was unjustly done in a way that needlessly crushed the value of GSE preferred shares, injuring over a thousand community banks that purchased these shares as a safe AAA-rated investment at the encouragement of their bank regulators," Fine wrote.
SOURCE: ICBA