How at risk are preferred stocks of Fannie Mae and Freddie?

Question

The value of these preferred stocks has dropped dramatically. Given that the government seems to protect them I am wonder if investing in the preferred stock in these companies is a good idea.

Answer 1

These companies have operated under such lax regulation for so long that there is no way to intelligently analyze what their shares, or preferred shares, are worth.  I am an aggressive speculative investor, and I would not touch these shares with a ten-foot pole.   Here's an article on the skeptics who saw this coming for years.

http://www.findingdulcinea.com/news/busi...

Answer 2

the front page of every fannie and freddie prospectus explicitly says that the companies are not backed by the full faith and credit of the us government.

any equity stake in either is at risk now, because congress might just decide to wipe out equity-holders.  there is a significant chance that you might lose 100% of principal invested in any equity stake in these companies.

Answer 3

Off the top of my head, I believe that all their shares are preferred now that the government has announced that they would go so far as to by their shares.

Actually I am not aware of either having preferred class A shares, but it doesn't matter because the only advantage is the holder of such shares is guaranteed to be a repaid creditor if the company goes under. There is absolutely no chance of that happening.