I agree with some of what you are saying, but disagree with parts of it.
The instruments DO have a “hold to maturity value.” That is a fact. These instruments will generate some, now unknown, future cash flow. I acknowledge that it is extremely difficult to accurately estimate the future cash flows, in part because of factors dependent on future events, like the level of house prices, default rates, recoveries, etc.
I respect those who advocate the government taking direct equity positions in the banks as being a more effective way to recapitalize the banks.
In my opinion, however, the precedent of government taking ownership interests in the major banks, especially with Democrats in power, and the opportunities for intruding political and social policies into the workings of the banks (which is how we got into this mess) is worse than the alternative of the government buying mortgage-backed securities on the market and later reselling them or holding the assets to maturity.
I agree completely that the instruments have a “HTM value” — but WHAT is it? Aye, there’s the rub.
You might have one idea, I might have another, and both of us will likely be wrong, and the banks have yet another - because some of these instruments are going to see higher rates of mortgage defaults than there has been to date. Some of them might even out (eg, the ones for early vintgage) and level off — ie, the defaults won’t get much worse than they are now.
That all takes quite a bit of work to determine - and we simply don’t have the luxury of time just now.
The problem is, with these assets, the value is very much tied to the economy and how tapped out the mortgage borrowers become as a result of the declining economy.
I agree that there’s room for all manner of mischief in taking an ownership stake in banks - but remember — the current administration has the power to set the terms of the preferred stock if we get the deal done now. Most common stock has voting rights, most preferred don’t, and senior preferred stock is issued with its own one-off terms.
The banks and Treasury could hammer out a deal right now, before the change of administrations, to try to short-circuit some of the foolishness that the Democrats might try to impose on the banks via holding preferred stock. The key is to get going on these deals ASAP to get the terms set the way we want them.