So I read/scanned through the Document detailing the ruling by the Seventh Circuit Court of Appeals (filed 5/03). As I understand it, the Court ruled that Treasury and FHFA acted in accordance with HERA and consistently with precedent in past court cases involving, e.g., FDIC. The most chilling option provided by HERA was: "(ii) collect all obligations and money due the regulated entity." Naively, I interpret that to mean that they can legally take all of the money/earnings (NWS). The Court, however, specifically pointed to the Court of Claims regarding the 5th Amendment and taking of property without appropriate compensation to owners.
Although I believe that the argument that the companies have been nationalized is a slam dunk and that the shareholders are due appropriate compensation under the 5th, I find the past rulings regarding the legality of Treasury and FHFA actions vis a vis HERA and NWS to be very discouraging. This is especially in the context of item (ii) quoted above. For this reason and the general trend of plaintiffs losing in federal court, I see the odds of a ruling for plaintiffs by Sweeney to be 50-50 at best. Ultimately the Supreme Court will have to rule, which will incur the passage of a few more years at least. If the plaintiffs lose in the SCOTUS (again 50-50 at best), Treasury will continue to grab all of the free money until circumstances force a resolution. In this scenario, the common and junior preferred will necessarily decrease in value. Unfortunately, such "forcing" circumstances are likely to be dire, in which case the value of these shares will approach zero (and stocks in general will also decline significantly). My conclusion: the most likely scenario is long-term loss of capital for common and junior preferred shareholders and the passage of a decade or more before these shares are worth more than zero.
Other "standard" models of stock valuation (e.g., Buffett or Graham) also support a value of approximately zero.