Hi Julio,
Thank you very much for your devils advocate role. This is a helpful and productive discussion. A few responses below. 1. I would certainly expect that debtholders are much more wealthy than depositors. Deposits are for spending. Debt is for saving. Saving is done mostly by the wealthy. The saving rate is much higher for the wealthy and high incomes than it is for the low-incomes. Anybody know of some related data (e.g. saving rate by income)? 2. In addition, depositors deposited their money with known guarantees. The debtholders lent their money with no guarantees. Why should the debtholders be guaranteed ex-post? 3. Also, the debtholders received a higher rate of interest than depositors (often = 0). This higher rate of interest was justified precisely by the greater risk due to the lack of guarantees. So now the risk has turned bad, and the debtholders, not the taxpayers, should absorb the losses. Thats the way capitalism is supposed to work, right? If the debtholders do not have to suffer the losses, then the higher interest that they previously received was not justified. 4. You are right that much of the bank debt is held by foreign investors, including foreign governments. So requiring that these foreign investors to accept a debt-to-equity swap, along with all the other bank debtholders, may involve further considerations. But the foreign investors are not being singled out; they are being treated the same as all other debtholders. The reasons given above for why debtholders should absorb some of the losses apply as well to foreign debtholders. 5. Which FoF table is your source on bank liabilities? Thanks again. I look forward to further discussion. Fred ---------------------------------------------------------------- This message was sent using IMP, the Internet Messaging Program. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
