Banking & Capital Markets

Fannie, Freddie Fallout Spreads

Though not a financial firm, WellPoint reports big losses. Meanwhile, if you're a bank without losses, why not crow about it in an 8-K?
Stephen TaubSeptember 12, 2008

The health-care company WellPoint Inc. may be the first nonfinancial institution to report in a regulatory filing its losses on investments in Fannie Mae and Freddie Mac.

WellPoint said the market value of its holdings in the government-sponsored enterprises had declined by about $214 million as of September 8, which will result in an other-than-temporary impairment charge.

The company said the precise amount of other-than-temporary impairments that may be incurred on these securities in the third quarter is difficult to determine, given the significant volatility in their market values. They have a cost basis of about $243 million, it added.

Meanwhile, the parade of announcements from financial firms about upcoming write-offs on the GSEs’ preferred stock continues apace. Just since Thursday, financial firms warning about such charges include Cooperative Bankshares, Beverly National, Columbia Banking System, and Southern First Bancshares. These followed previous similar communications from PNC Financial Services Group, LSB Corp., and Cascade Financial Corp., among others.

So many financial firms announced write-downs that on Friday, People’s Bancorp of North Carolina issued an 8-K to say basically that nothing new was happening, which of course is not in the spirit of an 8-K.

The bank felt motivated to make sure the Securities and Exchange Commission knew that it held no preferred stock or bonds in Freddie or Fannie.