Comments on: John Hussman on Reckless Myopia http://www.creditwritedowns.com/2009/12/john-hussman-on-reckless-myopia.html Finance, Economics and Markets Fri, 10 Feb 2012 00:37:00 +0000 hourly 1 By: Edward Harrison http://www.creditwritedowns.com/2009/12/john-hussman-on-reckless-myopia.html#comment-57689 Edward Harrison Tue, 01 Dec 2009 21:34:00 +0000 http://www.creditwritedowns.com/2009/12/john-hussman-on-reckless-myopia.html#comment-57689 I agree this is why they were bailed out and I remember my defending the need to make senior and secured creditors 'largely' whole. Let me look for the quote. Here it is: http://www.creditwritedowns.com/2009/03/stuffing-bondholders.html This means that taking too much of a haircut on bondholders, especially senior bondholders, will undermine confidence in the system. In the Swedish example from the 1990s, this was recognized and a blanket guarantee was given to all depositors and creditors of institutions deemed to be solvent. Stuffing bondholders is not a good idea, but they too will have to take haircuts if we are to reduce moral hazard. We saw much more than a haircut at GM and Chrysler. I agree this is why they were bailed out and I remember my defending the need to make senior and secured creditors ‘largely’ whole. Let me look for the quote. Here it is:

http://www.creditwritedowns.com/2009/03/stuffing-bondholders.html
This means that taking too much of a haircut on bondholders, especially senior bondholders, will undermine confidence in the system. In the Swedish example from the 1990s, this was recognized and a blanket guarantee was given to all depositors and creditors of institutions deemed to be solvent.

Stuffing bondholders is not a good idea, but they too will have to take haircuts if we are to reduce moral hazard. We saw much more than a haircut at GM and Chrysler.

]]> By: gaius marius http://www.creditwritedowns.com/2009/12/john-hussman-on-reckless-myopia.html#comment-57688 gaius marius Tue, 01 Dec 2009 21:14:00 +0000 http://www.creditwritedowns.com/2009/12/john-hussman-on-reckless-myopia.html#comment-57688 i think the reason the bondholders were bailed at public expense is that the bondholders are the insurance companies. i think hussman would agree that sparking a contagion from banks to insurers is not in the public interest. these are difficult systemic problems, but with the financial system being so tightly coupled there really is little choice but to try to halt the collapse at the forward line of defense. i think the reason the bondholders were bailed at public expense is that the bondholders are the insurance companies. i think hussman would agree that sparking a contagion from banks to insurers is not in the public interest.

these are difficult systemic problems, but with the financial system being so tightly coupled there really is little choice but to try to halt the collapse at the forward line of defense.

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