Say the lawsuits get Treasury to settle. Can't we imagine this exchange to be realistically possible?
Treasury: Ok, you've got us by the constitutional balls, but we still regulate a lot of what you do. We can be on your case for many years if you're not willing to accept our offer. Here is it: We will make the prefereds whole again, at fair value. But not the commons.
Hedge Funds: Well, we're mostly in prefereds, but we do hold some commons. We'd be happy to settle here and now if all it means is we have to sacrifice the commons. It's a deal.
C'mon, we all know such conversations can take place. Am I just being overly imaginative here?
Would the hedge funds really fight tooth and nail for every single common and risk going to court and facing a potentially bad decision from a judge that makes them lose their entire case?
Would treasury ever be willing to make such an offer?
Why do I ask? I heard the recent Epstein interviews and read his articles. It's Excellent work and gives us all some hope. But that's all well in a world where the law ultimately is enforced. We all know that is certainly not the world we are dealing with here as we contemplate the future of FNMA (Hedge funds and Government are both quite willing to bend the law on occasion).
At some point the question of settling would naturally come up. As Epstein said, it's very difficult to sue the gvt, and very risky. Both parties would have a lot of leverage when it comes to settlement talks. Seeing as the hedge funds are mostly into the commons, they'd be most interested in protecting those. The treasury would be most interested in screwing the commons. To me, that is a realistic settlement possibility (unless, of course, I'm missing some big legal obstacle to such a settlement). Again, I'm optimistic and long while being willing to flip (not always my strength at this stage). I'm just trying to think of possible outcomes. Thoughts?
