Why "Common" Could Be More Desirable Than "Preferred"

Congress isn't hot on spending more money on banks. Neither are taxpayers.

So what to do if one of the megabanks falters?

Treasury has hinted it could convert its preferred stock holdings to common shares.

What magic wand can make $100 million in common shares more valuable to the banks than preferred shares? Financial 411 friend James Kwak takes a crack at it here. Basically, $100 million of frozen shrimp or long-stemmed roses would also be worth $100 million. But because common stock counts as capital, and preferred stock doesn't (sometimes, it's complicated), converting the shares could be helpful to banks.

Better yet - listen to Kwak explain it on today's 411.