[lbo-talk] Geithner clarifies

SA s11131978 at gmail.com
Mon Mar 23 21:04:20 PDT 2009


Michael Pollak wrote:


>> But we've *already* guaranteed all bank liabilities.
>
> By no means. What happened at Citi was a forced debt equity swap for
> large holders of preferred shares. They took a huge hit. And we've
> given absolutely no guarantee we won't do that again. Fear over
> unsubordinated debt is rampant. That's why -- unlike in the Swedish
> case -- nobody is investing in banks or lending them money.

I don't understand this. Nobody was forced to do anything. Geithner called up a bunch of preferred shareholders and asked them to convert early. They took a huge hit because they bought convertible bonds in a bank that's now insolvent. Or am I missing something?

[I'm way overposted, so I'm out.]

SA



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