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Deutsche Bank AG Message Board

  • mateintwo mateintwo Sep 17, 2008 2:26 AM Flag

    Treasury destroyed pfds as asset class

    Most politicians and the Treasury said back in August that the status/legal charter of the GSEs need to be clarified/amended some time in the future but not now when the markets are in turmoil.
    And what did they do at the worse possible time they went on and confiscated the assets of FNM/FRE and by doing so they dealt a deathblow to other (shaky and not so shaky) financial institutions (especially 39 billions of pfds held became virtually worthless overnight) and by doing so they also in effect shut down the market for financial pfds (maybe the most attractive way for companies to raise capital and to meet capital ratio regulations). In other words Treasury destroyed an important asset class and we see the result with (A rated) financial pfds now trading at market yield levels as bad or worse than junk bonds!

    The financial pfds are trading like a full-blown depression is around the corner (and the handling of the GSE’S by the Treasury contributed greatly to this in my opinion).

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