Could you please restate your thesis? I'm starting to worry that the prevailing attitude in DC will turn out to be one of desiring to find any resolution that prevents the "evil activist hedge funds" from profiting.
I think they'll care more about that aspect, because they fear it'll make them look bad if they allow rich people to profit, than they'll care about reaching a resolution that actually solves any problems.
So, any reconstituted version of the GSEs that does exactly the same thing the GSEs currently do would be fine with DC because even if it doesn't change or solve anything, it does succeed in icing-out the hedge funds. And heck, we already know DC doesn't care one bit for the rule of law.
Just think: this situation re-engineers the entire relationship between shareholders and risk and capital. Shareholders provide capital while accepting the risks, because they'll participate in the profits that result from taking that risk. But here...the gvt has entirely separated those elements into individual parts! There's still risk, but it's legal, political, and trading risk, not business risk, and it doesn't affect capital bc Treasury has capital available as a backup. And now, a GSE shareholder has provided capital, accepted the risks, yet has NO POSSIBLE PARTICIPATION in the profits unless the rule of law is strictly adhered to. But we see the courts, the previous admin, and possibly this one, not holding up the rule of law. And where is the "capital" that shareholders pay into the GSEs going? It's being systematically, legislatively reduced to zero. In its place is a deal by which Treasury will essentially provide replacement capital when it becomes necessary. And by all of that logic, these tickers are pure lottery tickets, devoid of any connection to the profits of the GSEs. The lawsuits are trying to recreate and enforce the legally necessary connection that has been severed, but they have not succeeded, mostly.
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