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To: Keith Feral who wrote (93456)	8/25/2010 2:50:40 PM
From: Crossy	Read Replies (1) of 118717

Keith, let me respond to you on the matter of preferred shares and different classes thereof. You wrote: "...The interest payments from the preferreds are taken out after taxes..." Well, I do not talk about the TARP preferreds (to the US treasury) but the interest payment of TRUST PREFERREDS are paid pre-tax indeed. Obviously there are different classes of preferreds with different tax consequences attached to them. en.wikipedia.org Also "...Preferreds are hardly a cheap form of capital ..." well, specifically for TIER-1 capital, there are. This is because the only other form available to the business is COMMON EQUITY. And if you look at the normal treatment of "equity yield" implied by most plain-vanilla DCF, the implied equity yield number is usually way higher than any form of indebtedness. You normally stumble over 10-15% "equity capital" yield assumption. Another implicit tradeoff in common equity is its dilutive impact rgrds CROSSY

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