Dividend Dead for Securities

Bennet Sedacca  Feb 27, 2009 2:00 pm

Dividend Dead for Securities
 
Treasury's move hurts insurance firms, folks on Main Street.
 

 

The Treasury just made a rather clear statement about their feelings for common and preferred securities (outside of TRUPS, which are backed by debt): You won't be getting a dividend for the foreseeable future.

This is generally in line with what I have been thinking (along with Minyan Peter) for quite some time.

But let me mention a few other items.



1. This is highly negative for insurance companies, as they are large owners of this paper and will now become "permanently impaired" due to loss of income. This will need to be written off/sold.

2. Mom and Pop, the holders of most of the non DRD-eligible securities, get smoked yet again - after the Fannie Mae (FNM)/Freddie Mac (FRE) deal, this is getting tough.

3. It officially closes the preferred securities market as a way for companies to finance themselves.

4. I openly wonder if this is an experiment or will result in a pattern. For the most part, I believe it will be a pattern.

The debt unwind continues. I imagine Bank of America (BAC) is next up.

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Comments (17) See All Comments »
03-01-2009, 10:23 am
David, America is made up of more than just large companies. There are several smaller companies across the country who employ many people and whose proprietors are taking risks every single day. If they go down, there is no $50 million golden parach
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03-01-2009, 11:42 am

"there are LOTS of winners in the "game" of capitalism"

Matthew, you take my analogy too literally. Sure there are "lots" of winners under capitalism but there are lots more losers. The myth i
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03-01-2009, 11:59 am
David,

You are absolutely correct. That is why capitalism works best with a progessive tax code, and that is why the redistribution of wealth in this country over the past several years, mirroring the roaring 20's, has brought us b
Read More
03-01-2009, 2:06 pm

"As for small business owners taking risks everyday and who often die trying...this isn't news to me. I am one of those small business owners. There are no bailouts for me...and shouldn't be! However, the flaw in capitalism i
Read More
03-01-2009, 2:40 pm

"One of the things I think about and am grateful for every day when I wake up is that I live in a system where I was able to choose to own my own business and make my attempt and getting to the top of that pyramid."

On
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