Speculation that the Obama administration is considering converting some of the preferred stock which it has obtained as a result of recent bank bailouts into common stock has added to investors already overburdened accumulation of worries.
The conversion of preferred shares to common stocks will give the administration more freedom to further aid the stressed banking sector without stressing the government’s financial situation, i.e., there would be no need to allocate additional funds. However this move would simultaneously dilute the value of already existing shareholder’s common stock, thus adding to the market downturn.
Read more on this issue in the full article: “U.S. Stocks Lower As Banking Concerns Lead to Broad Sell-Off.”