(Everything regarding Lily and Grindelwald is consistent with canon, according to HP wiki. The only part that may or may not be is who has jurisdiction over Grindelwald since it is never mentioned in canon.)
Chapter One Part 2 -
Several moments of silence had passed as three pairs of eyes stared at Arcturus as if he had gone as senile as Cassiopeia.
Pollux, however, managed to break the silence, stringing a few words together under a whisper.
"Grindelwald? You're mad...How? Why now?"
Arcturus sat down and propped his legs up on his desk, appearing as confident as ever.
"I'm glad you asked cousin. I am not privy in answering your first question. As to your second, however, there are several answers."
Summoning his crystal glass and cognac bottle from across the room, he poured himself a couple of shots and began.
"The first reason may not sound so important, but it is quite relevant. Grindelwald has been locked up for about forty years now. The ICW would have likely expected his followers to attempt a break out at the beginning of his incarceration, but releasing him now when his security is likely to have been reduced to some degree would lend us the element of surprise. Very few would anticipate any such attempt at this point."
Indulging in his cognac and allowing the substance to leave a lingering burn as it trickled down his throat, Arcturus exhaled in pleasure as he continued.
"The second and perhaps the most obvious reason is if we had released him during the dark lord's reign there would have inevitably been a power struggle. This would have divided and weakened the pureblood families into factions that the ministry would have been able to overcome - quite easily I might add."
"Third," he continued without pause, "as you are all probably aware, it was less than a decade after Grindelwald's fall in which most of his followers had either been captured or went into hiding. No coordinated plan could have been concocted, or at least in any realistic manner. Had their been a futile attempt, it is quite possible that the ICW simply would have had him executed - or at least given him the dementor's kiss - in fear of continued attempts. After all, he's a very dangerous man to keep alive."
After Arcturus took one more swig of his cognac, almost downing the entire glass, he continued.
"Lastly, and perhaps most importantly - we need him now. The dark lord, for all his faults, did bring the pureblood families of England together. And now that we are united, to some degree, devising a coordinated plan will be much easier than it was thirty years ago. If we succeed - and I have no doubt that we will - the pureblood families of England - nay . . . Europe - will once again be an intimidating force."
Peering around the room, Arcturus noticed that Pollux had lit his Sherlock pipe as he stared at the floor and stroked his chin. Walburga, on the other hand, hadn't taken her eyes off of him. It was difficult to tell whether she was becoming angry or more inclined to agree with his reasoning.
Not having to guess any longer, however, she spoke up as her stern disposition resided into a congenial tone.
"Let us assume you are right about all of this, Arcturus. What interest would he have in protecting Harry Potter? Our new...heir," she finished with reluctance.
"He may not, but he would have an interest in protecting us from the Dark Lord, and in effect, or new heir," Arcturus replied at once. "Before I move any further though, let us fully relieve ourselves of this notion that Harry Potter might not be a worthy heir to this family."
Reaching inside his jacket pocket, he revealed a dusted leather bound book and tossed it onto his desk.
"The Dark Lord's headquarters just happened to be at Malfoy manor. After he fell, Abraxas was able to rummage through some of his personal affects. Interestingly enough, he came up with this," he peered down at the book he just tossed onto his desk. "There were rumors of this, and surely Bellatrix was aware of it. There was a reason he visited the Potter's a few nights ago, one that went well beyond revenge."
Surveying the room to make sure he had every one's attention, he continued his explanation.
"There was indeed a prophecy of sorts, mentioning a boy with the power to defeat him... one born near the end of July to parents that had thrice defied him. The two names written in this book are Harry Potter and Neville Longbottom. Obviously, the Dark Lord believed the prophecy referred to the Potter heir. That is almost certainly why he attacked them, to rid himself of that threat. Would you really believe that the Dark Lord would choose a half-blood as the one that would bring about his demise?"
At this point, the constant tick emitted from the grandfather clock in the far corner of the room was the only noise left among them. Not one member of the family was willing to reply just yet.
"You may not want to hear it, but I will mention Lily Evans once more," Arcturus continued. "Abraxas informed me that Lucius was a friend of Severus Snape's growing up. Apparently, he was infatuated with the girl. If Severus spoke the truth, and I have no reason to believe otherwise, then Lily was able to accomplish something that no one in this room has ever dreamed of. It is believed...at least from what Severus has said, that not only could she summon her accidental magic at a young age, but she could control it. A rare feat for even the most powerful witches and wizards."
Walburga's eyes widened at this, lowering her lower lip by a half inch and allowing her smug expression to dissolve into one of sincere contemplation.
"At Hogwarts, she went on to be named head girl," Arcturus explained as he finished his cognac. "Then, a few years later at the young age of twenty-one - I believe it is worth repeating - she fought off the dark lord three consecutive times. It was only a few moments after her death when her one year old child defeated him without anymore than a scar left atop his forehead. This was no ordinary witch Pollux...Walburga, she was a prodigy - certainly not a mudblood. Whatever mystery lies behind her birth, or whatever conspiracy is hidden behind her upbringing, her child is no half-blood. So let us accept this once and for all. I would never in my whole life allow a half-blood into this ancient family. You need only to see the evidence behind me," he gestured to the family tree painted on the wall.
As he stopped speaking, he could see that both Pollux and Walburga looked as though they were beginning to come around, both impressed by what they had just heard. Even Bellatrix, lying on the floor bound in ropes, appeared to be pondering the different possibilities.
"Good," Arcturus concluded at hearing no response, releasing both the silencing spell and the ropes that bound Bellatrix in one swift motion. "Now that you are at least attempting to see reason, we can move onto what I was saying."
Filling his glass with another shot of cognac, he plowed on in what could have been mistaken as a condescending tone.
"Grindelwald, along with the solid unity of the pureblood lines in England, will safeguard our heir from the Dark Lord. And unlike the extremist views that he held, Grindelwald's ideology attracts many more followers than just the purebloods of England. After all, he commanded a force that spread across all of Europe when he was in power. No single individual, not even the dark lord, can overcome that."
Arcturus could see that Bellatrix had wrinkled her nose and narrowed her eyes, appearing aggravated at these words. Somehow, though, she was able restrain herself as he moved forward.
"Grindelwald is more concerned in actually achieving his cause than he is in achieving absolute control. That's why I followed him. He was power hungry, sure, but he was never a tyrant. I knew him well, and he never feared death either. So now that he is an old man like myself he might be willing to accept a successor at some point. Now...Don't misunderstand me. I am certainly not coming to any rash conclusions here. But if our heir possesses the power that I foresee in him, and that the prophecy suggests, than it is not at all unlikely that Grindelwald will take a special interest in him. I believe he would like to see his cause carried out to the end, even in his death."
"This cause you speak of, "Bellatrix replied as she rolled her eyes, "co-existing with muggles. It's a dream! A nightmare! What kind of -"
Arcturus cut her off as he burst into a mocking laughter, provoking Bellatrix to jut her jaw forward and squint her eyes as if being forced to listen to a muggle.
"My dear Bella..." his laughter settling into a subtle chuckle, "you know nothing of Grindelwald. It was the dark lord's vision that was a dream. Do you actually think he could have wiped billions of people from this earth with a simple swipe of his wand?"
"They're ants! Insects! He would have wiped them off the face of the planet in days had he been given the chance!"
Arcturus cracked a smiled, closing his hazel eyes and spreading the fingers of his right hand across the wrinkles of his forehead.
"Well, at least you are right about one thing," he sighed. "They are ants, and we the grasshoppers - superior in every way...except one, of course"
Bellatrix fumed at these words.
"And in what way are those filthy muggles superior to us!" she screamed.
"Calm yourself Bella," Arcturus replied in a soft and reserved tone, attempting to quell his grandniece's rage. "I would never say there is a single muggle superior to any single witch or wizard in any way. Certainly not. But together, not only do they outnumber us a thousand to one, but they have accomplished extraordinary things. Their technology is now their sorcery. They have explosive devices they call bombs, killing thousands of people in the blink of an eye. They have planes that fly faster than the speed of sound, you know what planes are, yes?" he was now trying hard not to patronize her. "Biological weapons spreading terrible diseases, guns that kill faster than wands, rockets that fly into outer space - capable of only god knows what. You must see reason. They are masters of destruction. We cannot defeat them, only control them."
Bellatrix swallowed a knot in her throat, glaring at her grandfather with hardened eyes. She immediately opened her mouth on impulse, yet nothing came out. Before she could think of anything to say at all, however, Arcturus addressed the entire family.
"Grindelwald wanted what every pureblood wants - class structure! Every successful civilization in the history of the world possessed a large working class. Even if we were able to exterminate the muggles, it would serve us no purpose. Grindelwald knew this! Fear is our greatest ally. The unknown is always a devastating weapon to barbarians. But if we started fighting them now, we would lose. And if they ever found out the degree to which they outnumber us, they would hunt us down, dissect us, and try to harness our power. It would be the witch hunts all over again!"
The entire family appeared consumed by the fervor in which Arcturus spoke, not having heard the man speak with such emotion in years. Even Cassiopeia looked as though she wanted him to continue. Seeing their faces, however, Arcturus softened his voice and ended the discussion at once.
"That is why we cannot barge into the muggle world headlong, wands at hand. At any rate, I do not have anymore time for this nonsense. You have all taken an oath, and you all know what to expect from the sole heir of the Black family. Every single one of you will have a part in his childhood, and I expect you to treat him with the utmost care. Do not fail me."
With that, Arcturus rose from his seat and hobbled towards the library door with his cane, slamming it on his way out and leaving his family staring at one another in utter silence. The Arcturus Black that had disappeared into the shadows of his office for so many years was heading the family once more.