The point I keep raising regarding the very similar AIG bailout remains significant and precedential, especially in light of the absurd length of conservatorship duration within which shareholders have received nothing of any real substance. There is an abiding rationale for FHFA and UST to wipe the SPSPA liquidation preference slate clean and end the NWS.
I am tired of getting beaten up for such claims, but all logic is on my side. Can anyone name any other conservatorship that dragged on for ten years? FDIC which routinely deals with such events certainly exhibits no rehabs that come to mind that took so long; they either fix or they go into receivership. After a year or two, shareholders and other stakeholders at least get a shot at some compensation for all their rights having been suspended. The last study I saw was from Alvarez & Marsal and showed that a liquidation would net par for preferred shares and even leave some small value for common shares.
The government, et. al, bears the responsibility for keeping private companies in limbo because it immersed the "solution" FHFA sought in a political debate over reform of the housing finance system. But the government-appointed regulator and conservator had the responsibility under HERA to end the conservatorship in either a release or a receivership. FHFA that had no statutory role in solving or awaiting some political achievement involving larger and more complex issues and action by Congress. Congress already acted on the GSES when it passed HERA.
It is my opinion that FHFA should have either put the GSEs in receivership in mid-2012 or left well enough alone and sought escape from the SPSPA provisions and conservatorship that barred investors of record going back well prior to 2008 to receive ANYTHING from what became an imprisoned investment.
Whether government was too timid, too stupid to resolve or too greedy to keep sweeping money into Treasury's coffers is a matter for another discussion. The FACT is that the government OWNS FHFA's inability to fulfill its statutory mission enacted under HERA and government OWES fixing the mess their intransigence created.
THIS IS AN INSANITY. THIS IS THE HOTEL CALIFORNIA ON STEROIDS. THIS IS OUR GOVERNMENT AND HOW IT FAILS TO WORK.
