from ZeroHedge.com: When Government Intervenes in the Banks

Nationalization. What happens to owners of bonds and preferred shares when government bails out a bank? It depends (see the table in ZeroHedge.com). For Government Sponsored Enterprises, Fannie Mae and Freddie Mac, preferred dividend deferral. For Lehman and Wamu, bond default.

"As one can see from the maze of policy reactions in the above 8 cases (which are not exhaustive, there have been many more failures), the only things that have been consistent is that absent an outright (semi) liquidation as was the case in Lehman and WaMu, the debtholders were never impaired. ..However, while this may be true for senior debt instruments, the fate of junior debt as well as Hybrid/Preferred layers is not so certain. All nationalization would really do, would be to eliminate certain junior capital tranches. Indicatively, Citi and BofA have about $100 billion in junior instruments (preferreds and hybrids), while the other too-big-to-fail banks have roughly $160 billion among them (Wells, JPM, Morgan Stanley and Goldman), implying there is a U.S. tranche of over $360 billion of non-debt securities that could potentially be eliminated before debt impairments would have to occur."