I guess I'd wait and see until we see how the discovery process unfolds in the court of claims case. The other side has a great PR argument, but how will they like it if they have to provide their backup for what they've done? Even if the discovery is only in service of answering the jurisdiction question, discovery is still a big deal for the govt (Tsy and FHFA) to deal with.
I would say that the PR argument could influence the courts at some point, but we haven't seen much evidence of that so far from Judge Sweeney. Judge Lamberth has been quiet so far (presumably a busy guy), but doesn't seem to have had any problem in the past with making decisions adverse to the govt's position.
BTW, Director Watt's position isn't unreasonable. The PSPAs are currently supporting the mortgage markets in a reasonable way in terms of the functioning of the mortgage markets. The PSPA are the status quo that he has to live with.
To redo the PSPAs would require a new agreement between Tsy and FHFA. I think Director Watt, whilst an independent regulator, is well aware that the Tsy would currently be unwilling to renegotiate the PSPAs. So, Watt is taking the world as it is and is trying to do his job accordingly.