[lbo-talk] Tett: The Bail-In Solution to Too Big Too Fail

socialismorbarbarism socialismorbarbarism at gmail.com
Sun Jul 18 01:05:37 PDT 2010


"But there is a crucial distinction: the 'bail-in' scheme does not use automatic triggers, but instead lets regulators decide when to wipe out creditors, just before the moment of collapse..."

Oh, so the independent (cough) regulators are the ones who decide... now I feel better.

After ditching that gosh darn confusing bankruptcy court business, I would assume that two good things about bankruptcy (that I can think of just off the top of my head) can be dodged in the future by financial institutions.

1) In bankruptcy, the filer must give excruciatingly detailed information on its debts, which becomes part of the public record.

2) In bankruptcy, if you mess around with your debts right before you pull the trigger (file for bankruptcy) so that certain creditors who you like are favored and certain creditors who you don't care about are screwed, you have broken some serious laws.

At least that's how US courts work. Or (OK, I'll admit it) are supposed to work. So, any chance *this* is what these folks are trying to avoid with the "bail-in" plan?

Then again, maybe I'm just being cynical. The good people at Credit Suisse are probably looking out for the best interests of Society In General. Because that's what they do, right?

On Sat, Jul 17, 2010 at 6:43 PM, Michael Pollak <mpollak at panix.com> wrote:
>
> http://www.ft.com/cms/s/0/5c681bec-9017-11df-91b6-00144feab49a.html
>
> July 15 2010
> Financial Times
>
> 'Bail-in' will save the taxpayer from the bail-out
> By Gillian Tett
>
> <snip>
>
> But what is still unclear, even amid all the legislation, is whether [the
> resolution authority, etc] will be robust enough to really prevent more big
...



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