1.You can't have a normal receivership, it disrupts the mortgage market.
Judge might say creditors get only 99.5 cents on the dollar. This is unlikely but this creates uncertainty and chaos.
2. Another reason conditions are not normal are the questionable motives , actions of the government. They are saying they are special creditors who provided financing and are entitled to 120 to 130 cents on the dollar. The creditors just ahead of them get 100 cents on the dollar and the class of the same security one rung below jr pfd gets nothing. For the jr pfd , this conservator regime is worse than a liquidation. They by law (hera) are subject to no court. I would think in actual bankruptcy they would have to explain to a judge why. I guess this a "legislative bankruptcy".
3. Can they get away with it? Well maybe they can! I will defer to others as they understand law more than I do. I just think Ted Olsen needed to explain that not just dta's were written down in 2008, but the excess loss reserves that created losses in 2009 that were then reversed in 2013. In the real Tim Howard's words any jr financial analyst would have understood that large amounts of the losses in 2009 were non-cash charges that would reverse. Apparently these hypothetical people know more than Ted Olsen , and three appeals court judges about financial accounting for banks and insurance companies.
4. When does the liquidation value begin? The government will argue everything goes back to November 2008 etc for valuation purposes. I can't see how you do that. The market was assuming the worse case scenario and defaulting mortgages that were still being paid every month. This" market " had liquidity problems and was dominated by forced sellers. I agree with the former head of Wells Fargo at the time that is not rational to use the irrational "market" to value things at the bottom. By the way , this is why I discredit academic analysis that takes the pessimistic accounting as a given and then adds even more mtm analysis. Under their standards every investment bank including Goldman is probably insolvent in September of 2008.
5. In any case, any liquidation or bankruptcy is supposed to value assets on the date of the bankruptcy. Bad loans at the Gse's go lower and lower every month. I am not sure though that the government has to conduct a receivership subject to any review by the courts. What is Fdic law here? Perhaps Mel Watt and Jack Lew are the bankruptcy judges? Jeb Hensarling and Richard Shelby might also be consulted. Who knows what they will come up with next?
6. I am not sure with your positions on the issues that you really should hold that much Jr pfd. If the courts agree with the government , there seems no reason for the government to even give anything to the jr pfd. Perhaps you are counting on government officials in the Executive branch to have more respect for rule of law than the courts ?
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