Fannie, Freddie Cut Bank Profits
Banks holding various Fannie Mae and Freddie Mac securities have been forced by accounting rules to book losses against their bottom line. In a Reuters piece: "(With) Fannie or Freddie you have to understand credit risks today that you would not have considered five years ago," said Charles Viater, chief executive officer of MFB Corp.
Astoria Financial Corp. recorded a $9.6 million charge, Sovereign Bancorp Inc. took a $21 million, and an impairment of Fannie and Freddie securities cost The Peoples Holding Co. 7 cents a share, according to Reuters.
The December sales to raise reserve cash at Fannie, forced as part of the accounting scandal, have also hurt those holding the GSEs' securities. "Looking back at the mammoth sale by Fannie that hurt his bank's holdings, Tupelo's Johnson said: "We felt like: 'why did they do this to our paper?"'