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Bank bondholders
Burning sensation
Taxpayers should not pay for bank failures. So creditors must
Protecting the taxpayer, especially the majority of taxpayers that had no dealings with all of this bank frauding is a must.
There are a select few, the banks know who. These people/companies made millions on overvalued real estate etc. These monies are still around. The problem is not finding this money but proving the legal paper trail.
Governments, police agencies that are not corrupt can legally find the culprits.
Where they do or not is up to them, and the people who vote them in.
Will the public not remember this financial fiasco in a few years.
Those who profited at everyone else expense hope so.
Can the public reveal the truth asap?
The layer cake analogy is useful, but the investor segmentation has to be much more thorough, by type of investor rather than by type of debt instrument. Only then can you hold the different classes of investors to account, including the shareholders who are supposed to take the fist loss. I would presume that selling hybrid risk-bearing debt to illiterate investors who sign by thumbprint would be considered illegal in most EU and OECD jurisdictions. If the illiterate/widows/orphans can prove they hold these investments from the beginning, regulators should "save their savings" and fine the irresponsible banks who sold them the risky paper.
The unintended consequences (capital flight) that we are seeing now have a lot more to do with the mis-treatment of local retail depositors, whose confidence is critical to any crisis solution, than to the theat to the wholesale creditors and investors who've had nearly 3 years to get paid back (thanks to ECB emergency funding), hedge or provisision eventual losses.
Curiously, the article only mentions Deposit Insurance in reference to to US-FDIC set up in the 1930's to protect local retail depositors, and segregate these from wholesale funding, including profession bond investors and inter-bank lines of credit.
Why the taboo regarding an pan-European Deposit Insurance scheme for retail depositors?
Under good prudential regulation, the taxpayer can reasonably be expected to come to the aid of small local retail savers, but should not bailout professional investors.
In a nutshell, follow the Iceland, not the Ireland, model.
Quite, once again it appears that the politicians did not "dare" take any money from these bond holders, not to spread fear on the markets.
Or were they sufficiently threatened by the same culprits?
Once again big money is siphoning state money out while imposing austerity on the middle and small guy.
Time to become indignant. Effectively.
An implied point is that the benefit of the proposed changes is that the market rather than regulation should act to limit bank borrowing via the increased costs of borrowing. This is a good thing as it would have restricted the risky investments and network of dependencies that led to the crash. While I am personally in favour of increased regulation if only as punishment for past misdeeds - I believe that bankters will ultimately find the means to evade these. Restoring a real market requires the elimination of the moral hazzard that currently exists. Put simply - stupidity and bad risk taking need to be punished.
When taxpayers foot the bill for the banks' stakeholders there is a crest of market inefficiency. But when the main beneficiaries of such a system (George Soros, Warren Buffett and body of billionaires) mock the efficient market hipothesis (EMH), there is a crest of market cynicism: all their fortunes are made despite of market efficiency and thanks to connivance of the laissez-faire governments.
So it's time to set The Market Cynicism Test: all the billionaires disclaiming EMH are thriving due to market inefficiency so they must bail-out the too big to fail banks.
unintended consequences of this scheme to fix unintended consequences of the last scheme.....the market will work.....if we let these banks fail.....market intervention circumvents natural selection of healthy financial institutions.....and we end with sick institutions crying for bailout and taxpayers crying "the market does not work".....
Readers' comments
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Protecting the taxpayer, especially the majority of taxpayers that had no dealings with all of this bank frauding is a must.
There are a select few, the banks know who. These people/companies made millions on overvalued real estate etc. These monies are still around. The problem is not finding this money but proving the legal paper trail.
Governments, police agencies that are not corrupt can legally find the culprits.
Where they do or not is up to them, and the people who vote them in.
Will the public not remember this financial fiasco in a few years.
Those who profited at everyone else expense hope so.
Can the public reveal the truth asap?
The layer cake analogy is useful, but the investor segmentation has to be much more thorough, by type of investor rather than by type of debt instrument. Only then can you hold the different classes of investors to account, including the shareholders who are supposed to take the fist loss. I would presume that selling hybrid risk-bearing debt to illiterate investors who sign by thumbprint would be considered illegal in most EU and OECD jurisdictions. If the illiterate/widows/orphans can prove they hold these investments from the beginning, regulators should "save their savings" and fine the irresponsible banks who sold them the risky paper.
The unintended consequences (capital flight) that we are seeing now have a lot more to do with the mis-treatment of local retail depositors, whose confidence is critical to any crisis solution, than to the theat to the wholesale creditors and investors who've had nearly 3 years to get paid back (thanks to ECB emergency funding), hedge or provisision eventual losses.
Curiously, the article only mentions Deposit Insurance in reference to to US-FDIC set up in the 1930's to protect local retail depositors, and segregate these from wholesale funding, including profession bond investors and inter-bank lines of credit.
Why the taboo regarding an pan-European Deposit Insurance scheme for retail depositors?
Under good prudential regulation, the taxpayer can reasonably be expected to come to the aid of small local retail savers, but should not bailout professional investors.
In a nutshell, follow the Iceland, not the Ireland, model.
See a proposal on paying for Deposit Insurance in the blog PPP Lusofonia http://ppplusofonia.blogspot.pt/2012/07/european-deposit-insurance-continues.html
Quite, once again it appears that the politicians did not "dare" take any money from these bond holders, not to spread fear on the markets.
Or were they sufficiently threatened by the same culprits?
Once again big money is siphoning state money out while imposing austerity on the middle and small guy.
Time to become indignant. Effectively.
An implied point is that the benefit of the proposed changes is that the market rather than regulation should act to limit bank borrowing via the increased costs of borrowing. This is a good thing as it would have restricted the risky investments and network of dependencies that led to the crash. While I am personally in favour of increased regulation if only as punishment for past misdeeds - I believe that bankters will ultimately find the means to evade these. Restoring a real market requires the elimination of the moral hazzard that currently exists. Put simply - stupidity and bad risk taking need to be punished.
When taxpayers foot the bill for the banks' stakeholders there is a crest of market inefficiency. But when the main beneficiaries of such a system (George Soros, Warren Buffett and body of billionaires) mock the efficient market hipothesis (EMH), there is a crest of market cynicism: all their fortunes are made despite of market efficiency and thanks to connivance of the laissez-faire governments.
So it's time to set The Market Cynicism Test: all the billionaires disclaiming EMH are thriving due to market inefficiency so they must bail-out the too big to fail banks.
unintended consequences of this scheme to fix unintended consequences of the last scheme.....the market will work.....if we let these banks fail.....market intervention circumvents natural selection of healthy financial institutions.....and we end with sick institutions crying for bailout and taxpayers crying "the market does not work".....