Thomas Kirchner goes into details about why, exactly, banks like JP Morgan are allowed to hold so much GSE stock in the first place - which is news because they've just written it down by 50%...

In general, banks are barred from investing in equity securities. However, the government made Fannie and Freddie preferred stock a “permissible” investment to create a sufficiently large market for these securities.
Of course, making the stock “permissible” didn’t necessarily make it attractive, so regulators had to pull another trick. Under the risk-based capital rules, national banks may carry agency preferreds at a 20 percent risk weighting, while state-chartered banks and OTS-regulated savings associations must apply a 100 percent risk weighting. This means that banks only have to hold 1.6% or 8% capital against their investments (or should we say ‘speculation’?) in Fannie and Freddie preferred stock...
why exactly did banking regulators award this favorable treatment for GSE preferred equity? They did so because otherwise, there would have been no market to place $36 billion of preferred stock... at the time when OFHEO had imposed a capital penalty on the GSEs, and forced them to raise additional capital - in preferred stock...
Now that Fannie and Freddie are in trouble, the government is in a bind. After encouraging banks to buy FNM/FRE preferred by loosening regulations, they cannot easily make the banking sector take $36 billion of writedowns on securities that banks only invested in because of strong government incentives. Bailing out preferred investors is less a question of moral hazard than of credibility of bank regulators...