As anticipated:

AP News (Yahoo): The impact on existing common and preferred shares, which have slumped in value in the last year, will depend on how investors react to Paulson's assertion that they must absorb the cost of further losses first.

The Federal Reserve and other federal banking regulators said in a joint statement Sunday that "a limited number of smaller institutions" have significant holdings of common or preferred stock shares in Fannie and Freddie, and that regulators were "prepared to work with these institutions to develop capital-restoration plans."

So, if I read this correctly, individual investors will take it in the shorts and the government will make banks whole on shares they hold?

Anyway, according to the article, the plan will immediately transfer $5 billion of mortgage backed debt to the Treasury, meaning it's added on to the already staggering national debt. The Treasury will also buy $1 billion of worthless stock in the companies.

Money quote:

Paulson said that it would be up to Congress and the next president to figure out the two companies' ultimate structure and the conflicting goals they operated under — maximizing returns for shareholders while also being required to encourage home buying for low- and moderate-income Americans.

Emphasis added. Yet another example of how free markets and the profit motive solve every problem and meet every policy need, as long as the profits are privatized and the risks are socialized. Somebody ought to go to jail.