It amazes me that those betting on commons -while expecting a recapitalization- do not understand what you said. In my view, it is not realistic to consider an organic, slow recapitalization via retained earnings and a 4th amendment.
If there is a positive decision to recapitalize and reform or reform and recapitalize those in charge will make sure the recapitalization is part of a "capital restoration plan" as determined in HERA -and this time they WILL follow the law- and that any 4th amendment may be part of a more comprehensive program. In fact, there is a chance the administration may already have such a plan available, launch-ready, just in case some specific scenario develops.
One example of this restoration lies in Shapiro's proposal where he staged a 4-step scheme to build up capital over time. I believe it was 4 installments of 25 billions over a period of a year or several years? If a restoration of capital takes this shape it is not a guarantee that 100 bill will suffice and that amount could double cutting in half Shapiro's estimates of prices per share. And diminishing any return the government may obtain through warrants.
While the Jrs. may face other threats, one that they are not exposed to is recapitalization since they aren't strictly equity. I imagine that is part of the protection a preferred share has. They aren't directly dependent on earnings -but what has been retained- and the counterpart of not participating in the benefits of earnings expansion is that the dilution risk gets removed. For this reason, a forced conversion to common shares seems unlikely as the whole point of being a preferred is exactly not being subject to the perils of common shares. A conversion, thus, must be approved by holders of the Jrs.
A comprehensive capital restoration plan -as per Shapiro- establishes a first stage of 100 bill as enough of a cushion for the companies to exit conservatorships and enough of a cushion to restart distributions to the Jrs. The debate that it may take an eternity to payout the Jrs. is silly. No politician in their right mind -definitely not the FHFA and certainly not the Treasury- will favor a recapitalization that may take 20 years. Provided we finally get one. And provided Obama's team doesn't burn the ships on their way out.
