William Buiter Says Bank Bondholders Must Be Held Accountable

Former UK central banker and current professor at the London School of Economics, William Buiter, was an interview guest of David Faber this morning.  Clip runs approximately 7 minutes.

Comments

[DailyBail]

Workers at the largest financial institutions are on track to earn as much money this year as they did before the financial crisis began, because of the strong start of the year for bank profits.

http://www.nytimes.com/2009/04/26/business/26pay.html?_r=2&hp

[johnny]

April 27 (Bloomberg) -- Federal Deposit Insurance Corp. Chairman Sheila Bair sought authority to close “systemically important” financial firms, expanding powers her agency uses to wind down failing commercial banks.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aeH.c5sqMplw&refer=home

[Ain't Bullshittin']

Just sharing the spoils of victory over the American Public...nothing more...nothing less.

[James]

Here come the stress-test "leaks." Looks like Citi and BoA's bondholders are going to need another pound of flesh. This of course has no bearing whatsoever on the "current solvency or viability of the firm." That's right, these banks are solvent, by gosh -- IT"S THE LAW.

http://finance.yahoo.com/news/WSJ-Regulators-urge-BofA-Citi-apf-15049463.html?sec=topStories&pos=3&asset=&ccode=

[James]

Henry Blodget and Aaron Task of TechTicker have been on our side for a long time. Now they've practically become advocates. Several times a week -- either on TechTicker or at Clusterstock -- they argue for letting the bondholders take it in the you-know-what.

BTW, in spite of the headline, Obama is NOT planning on swapping debt for equity -- not that he knows what that means. But these guys HOPE that this will happen soon. I'm not holding my breath. What do you guys think -- will the Perfidous Trio of Treasury, FED and FDIC put us on the hook for another trillion or so, or will Obama finally come to his senses? Maybe he'll just tell Sheila to go chop these bastards up.

"Hooray! Obama Finally Considering Swapping Bank Debt for Equity*"
http://finance.yahoo.com/tech-ticker/article/238655/Hooray!-Obama-Finally-Considering-Swapping-Bank-Debt-for-Equity?tickers=BAC,ms,jpm,gs,wfc,xlf

[James]

David Leonhardt of the NY Times has a sound article in yesterday's paper about the issue of letting the bondholders take a haircut. As far as The Daily Bail goes, Leonhardt pays far too much deference to TPTB -- don't be bringing your establishment-boot-licking shit in here, Ivy League boy! -- but the idea of letting the bondholders pay their fair share (i.e. damn near all of it) is starting to go mainstream.

This is a fantastic new development. Joe Stiglitz and Bill Ackman were on Charlie Rose the other night, and they maid the same point -- swap debt for equity. (I'll look for the link for that.)

But here's Leonhardt's NYTimes piece:

http://www.nytimes.com/2009/04/29/business/economy/29leonhardt.html?_r=1&ref=business

[DailyBail]

Those are great links James. I saw both articles a few weeks back. It is good news, but I've been trying to stay realistic. When I hear Geithner or Summers seriously address (hell, even discuss) bondholders taking a hit then I will start to believe more seriously.

I'll be posting the Charlie Rose stuff soon.