Valuethinker wrote:...
I am sure the US is no different in this regard. The authorities are just not going to bail out a bank without inflicting pain on everyone but the depositors. That, in fact, is the whole point behind the $80bn of CoCos (Contingent Convertibles) being issued by banks at the behest of regulators.
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Hi Valuethinker,
On the off chance that the Cyprus reference doesn't get this thread locked or worse, the EU has been moving toward the US system, in which:
The holders of FDIC or NCUA insured deposits are made whole first, using government funds if necessary.
Then, if there's enough left, uninsured deposits are made whole.
Then, if there's enough left, holders of senior debt are made whole.
Then, if there's enough left, holders of subordinated debt are made whole.
Then, if there's enough left, shareholders get something, but if there were enough to make the insured deposits, uninsured deposits, holders of senior debt, and holders of subordinate debt whole there wouldn't have been a need to go out of business in the first place.
That
is the dreaded bail-in.
PJW