Cal National Bank's $500MM Preferred Shares in Fannie & Freddie WORTHLESS but AIG's CDS TBTF counterparties made whole

When it comes to bank's management safety and soundness decisions this one seems to draw a line; was it more safe and sound to invest a bank's funds in preferred shares of large, (correct me please if I am wrong here) AAA - rated Government sponsored entities with a long standing "open market - priced" belief of an implicit (if not explicit) government guarantee or as the TBTF club did, hedge large, excuse me but I'm not off first base when I suggest grotesquely large, leveraged, primarily off balance sheet DERIVATIVE investments in RMBS, CDO's, CPDO's and CMBS with credit default swaps (CDS) issued and backed by an unregulated company? Yes an UNREGULATED company, perhaps even an off shore entity.
As an aside were they perhaps taking legal advantage of lower than IRS off shore corporate tax rates or more loosely regulated and enforced capital requirements?

AP and the LA Times reported the death of Cal National was brought about in part due to $500 million virtually WORTHLESS investment it held in preferred shares of Fannie Mae and Freddie Mac as reported also by the LA Times.
Read AP story here http://news.yahoo.com/s/nm/20091031/ts_nm/us_usbancorp_2
Read LA Times story here http://www.latimes.com/business/la-fi-bank-failure31-2009oct31,0,5224531.story

Uh lets do a side by side - Fannie and Freddie were both GSE's (government sponsored entities with the long standing implicit government back stop), it's preferred securities were at one time not long ago rated triple AAA by all major rating agencies, and paid timely dividends.

AIG was the largest insurance company in the world and according to Hank Greenberg's statements on the Charlie Rose show September 17, 2008 was a "national asset" - yes - true statement - and pleaded for more time (and implied as we learned long ago time is money).

AIG, the regulated insurance company, however was NOT one and the same entity issuing the credit default swaps - although the name was the same - the sameness I believe ended there.

I shouldn't and I don't normally but I can't resist - so I'll stick my neck out on this and hazard a guess that its traders may have intimated that CDS were "backed" by AIG and certain off shore entities including the likes of the Greenberg - controlled CV Starr entities) it was not AIG but AIG Financial Products Group; a separate, not the same, NOT AIG the world's largest insurance company, NOT AIG the "national asset" but this: a distinct cat of a different unregulated stripe, not including the securities lending unit of AIG FPG (of which we'll likely never fully know what was going on there as it's not tightly regulated when it comes to registered securities let alone unregistered securities), not sure what rating they possessed it all - but I'm guessing again but reasonably certain that it was not or ever AAA rated; if at all; it was not or ever a Government sponsored enterprise - it was and still is a PRIVATE ENTERPRISE; Off Shore enterprise, not sure what AM Best rating they possessed, if any how's that for supposed due diligence by the TBTF club? - however, probably not top notch; although we can see similar mono line insurers like MBIA, AMBAC, FGIC, and a host of others and this: the ABSENCE of emergency, extraordinary government support. Yes the ABSENCE of government support.

What was it about AIG's CDS that were more WORTHY of over $182B of US taxpayer / government bailout dollars than Fannie and Freddie's securities - could it be the Too Big to Fail TBTF Club members? Ya think?

Could it be the TBTF club allied / aligned themselves post the Bear Stearns rescue in March 2008, then after the cool, balmy, soothing breezes of summer-in-the-Hamptons vacations were over spied the chess board and which pieces needed moving and leveraged themselves against the weak independent Lehman Brothers. Could it be that Mr Fuld thought it would be as it always was - when others in the nascent TBTF club were no longer dealing them cards let alone from the same deck of cards?

At least it appears to this writer (and I did get hit in the head playing soccer a week or so ago) that private insurance contracts were IN FACT MORE worthy of government support than the preferred shares of the GSE's - calling a spade a shovel and so should more of those watching the US Taxpayers' and future generations' purse.

But we can see that the FDIC TLGP program is supporting over $248B in debt - some issued by NOT FDIC INSURED - correct NOT FDIC insured affiliates of 32 banks and thrifts. See the FDIC's TLGP September 2009 report here AND READ the FDIC's footnote very slowly and carefully - "The amount of FDIC-guaranteed debt that can be issued by each eligible entity, or its cap, is based on the amount of senior unsecured debt outstanding as of September 30, 2008 http://www.fdic.gov/regulations/resources/tlgp/total_issuance9-09.html
Unsecured debt and the date - September 30, conveniently AFTER the AIG CDS counterparties bailout; but then maybe it's just a coincidence huh?

As stated here before Membership and Affilation has its privileges! Why do we enable same with radio silence? Raise your voice - just once it won't hurt, it won't kill you, you might even feel al little better (I can guarantee this: you won't feel any worse), your voice may inspire one more. Then it may just turn into a loud roar of disgust, CLAWBACK and CHANGE WE CAN BELIEVE IN.