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The trouble with owning a bazooka is that everyone wants to know where it is pointing. As the chances of Fannie Mae and Freddie Mac raising sufficient fresh equity in the capital markets become ever more remote, Hank Paulson's bazooka – his description of the Treasury's new authority to buy equity in the government-sponsored enterprises – is widely expected to wipe out common shareholders, as a matter of political necessity. Freddie's stock is now trading at less than $3.

Among the unintended collateral victims of crossfire, however, could be the struggling US regional banks. As holders of preferred shares issued by the GSEs, they face large losses should the Treasury intervene by buying freshly issued senior securities that rank above some $36bn of existing preferred shares, thereby jeopardising their dividends.