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

Michael Pollak mpollak at panix.com
Sun Jul 18 06:13:18 PDT 2010


On Sat, 17 Jul 2010, socialismorbarbarism wrote:


> 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.

IIUC, you're leaving out something that is much more severe for the financial institutions. Tett is assuming this would be put on top the current resolution regime just passed, which would fire management and wipe out shareholders as an immediate matter of course.

At that point, it doesn't seem to me there's any "you" left to profit from such shenanigans. Management-shareholders would avoid it like the devil.

Michael



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