In the now overcrowded world of investing in distressed securities, the standard strategy is to pick the "pivot" issue, which may be an unsecured bond, or some odd piece of paper with a useful indenture, that is the problematic part of the capital structure. Securities with seniority above that of the pivot get paid out, securities below that get wiped out or have their value seriously impaired. The idea is to buy the pivot at a good price.

In the past couple of weeks, it seemed that the entire US economy had a pivot security or set of securities: the preferred stock issued by the government-sponsored entities, or GSEs. Fannie and Freddie, the Sodom and Gomorrah of "public/private partnerships", sold about $36bn of non-cumulative preferreds to the banks and the public, with the aggressive support and encouragement of the Treasury and the GSEs regulator.