You are correct. Those that worry about LP are just trying to cast doubt on the potential of the c shares. LP is irrelevant unless the companies file for BK liquidation; hence the name "liquidation preference."
I believe - with reasons from years ago - but leave me now
HERE - because the Senior Paper (Preferred Shares) never change in "price" or quantity - i.e. do not trade
THUS - the GOV needs a way to add to the original obligation for the IOUs that are written each quarter and any other obligation of F and F to TREASURY
SO the LP is > the "equity value" of the SP and is the amount the Treasury believes it would take to buy out the SP
Can someone explain to me, why we are on the hook for and why are we concern with Liquidation Preference.
Liquidation preference matters in a restructuring, and a restructuring of FnF's balance sheets (mostly dealing with the senior prefs) is something that must be done in order for FnF to ever reach their regulatory capital requirements.
Am I wrong to interpret LP that way?
Yes, because you left restructuring off your list.
You also missed the fact that the conservatorships function like administrative bankruptcies, meaning FnF went into a bankruptcy-like state in 2008 and are still there. It isn't the entry into bankruptcy that legacy shareholders need to fear, it's the exit.