Re: pwb’s question on the value of shares in bankruptcy. The shares are already junior in priority as a matter of both corporations law and common law rules on priority. Bankruptcy doesn’t cause that to happen-state law does. That said, nothing in bankruptcy strips shareholders of whatever equity there is. Thus, the fight in Johns-Manville was over the value of equity’s share. At least historically, LoPucki and Whitford’s work has shown, equity retained some interest more than general rules on solvency and priority would predict. So, if the “real” market value of BS common is $30, and JPM is paying $10, then bankruptcy transaction costs would have to eat $20/share to eliminate shareholders’ equity. Certainly not impossible, but not guaranteed, either.

Having interferred with the operation of the “market”–as that term includes the procedure known as bankruptcy–the Fed has assured that we will likely never know.

Absolutely. While shareholder interests are a company’s top priority during solvency, it drops to the bottom of the list upon the filing of a bankruptcy petition. So, it might be safe to say that shareholders definitely get a better deal with an out-of-court restruturing with JPM than they would if BS filed for Chapter 11 protection.