It’s much, much bigger than regional banks buying GSE preferreds. You can buy Fannie and Freddie senior debt at significant spreads over the government which is guaranteeing it; hell, you can write credit protection on the US government and make non-negligible amounts of money doing so. More generally, there’s a large number of bonds out there issued by non-leveraged companies which are nicely profitable and don’t have significant funding needs, but which are still trading at all-but-distressed levels.
So here’s my question: Let’s say you’re a buy-and-hold investor — someone with a personal pension fund, say, which won’t be touched for a couple of decades. You don’t care much about mark-to-market losses, you just want to take advantage of some of the present craziness to buy good long-term assets on the cheap. I’m not talking distressed debt funds, or anything which requires active management: I’m just looking for a simple way of playing the reversion-to-making-sense trade. Is there one?