You are mistaken. JPS are only callable at par. These are contractual rights that belong to individual shareholders, not FHFA.
FHFA "stepping into the shoes" means they control voting rights. They control whatever decisions are made for the company. They do not control shareholder contract rights such as dividends and liquidation preference. They cannot simply "assign" a liquidation value that is different from the original contract.
In the Lamberth case, plaintiffs have direct claims because the contract rights do not belong to FHFA. If they did, these claims would be derivative.
Also worth noting, if Treasury had the power to zero out JPS or commons--if it were legal, which it isn't--they would have done so in the last 14 years. They cannot, which is why all of this litigation will be problematic.
You guys can fuss about the dilution of commons, but the price of the shares is basically arbitrary. Treasury will take 80% of the companies through the warrants, whether the share price is $0.80 or $800 (reverse split). This doesn't change the value of the underlying enterprises, only your piece of the pie. But any private capital coming in will dilute that pie. Also how SPS and JPS are treated may also dilute that pie.
While the circumstances of this conservatorship are unique, dilution is ridiculously common (pun intended) for public companies. Companies raise capital all the time at the expense of existing shareholders. Warrants, which are also very common, are dilutive as well. There is nothing in your stock certificate that says your shares cannot be diluted.
On the flip side, there are only three ways that JPS receive less than par. The first is if they agree to a haircut to get Treasury to settle these lawsuits sooner. The second is if the capital requirements are set so high that the companies cannot build fast enough to reach the requisite level (in which case they would be put into receivership). The third is if there is a housing apocalypse that necessitates another bailout--they will not let existing shareholders survive a second time.
I don't know which type of shares will yield a better return over time; it's very possible that commons might avoid some dilution and reach $20/share. That said, there are, unarguably, many scenarios where commons fare far worse than JPS. Whether or not you like that fact doesn't change the reality.
AI
