It is simple, and it is straight forward, there is a line of people who take the pain when banks encounter problems and it goes like this:
1. Equity Holders 2. Preference Share Holders 3. Mezzanine Finance 4. Subordinated 1 5. Subordinated 2 6. Lower Tier 1 7. Lower Tier 2 8. Senior Bonds & Depositors
So we don’t need to get caught up in taxpayer solutions because there is already people who are willing (by the nature of buying a risk instrument) to take the pain for us. I have mentioned this before when talking about the reasons for a borrower bailout not being likely.
I was impressed with Philip Boucher-Hayes’s podcast on this topic yesterday. And specifically the call to ‘Close AIB’ by Dr. Stephen Kinsella. Closing banks that are not up to scratch is something I have been advocating for years, perhaps the best public statement was on Newstalk back in January 09′. When I spoke about closing Anglo and the …