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John Hussman of the Hussman Fund points to the obvious place to find solvency for banks, but you don't hear Congress or the administration talking about: The Bank Bond Holders.
He breaks down a plan that would make bond holders accept responsibility, and thus minimize tax payer risk and involvement. This is going well beyond Dodd's flimsy warrants idea.
http://www.hussmanfunds.com/wm...
Here is a snip:
"The key is to recognize that for nearly all of the institutions currently at risk of failure, there exists a cushion of bondholder capital sufficient to absorb all probable losses, without any need for the public to bear the cost.
For example, consider Morgan Stanley's balance sheet as of 8/31/08. Total assets were $988.8 billion, with shareholder equity (including junior subordinated debt) of $42.1 billion, for a gross leverage ratio of 23.5. However, the company also has approximately $200 billion in long-term debt to its bondholders, primarily consisting of senior debt with an average maturity of about 6 years. Why on earth would Congress put the U.S. public behind these bondholders?
The stockholders and bondholders of the company itself should be the first to bear losses, not the public. That is the essence of what a free and fair market, and a responsible government would enforce. The investors in the companies that produced the losses should be accountable for them, and the customers and counterparties should be protected."
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Hussman also includes a refinancing plan. but I think his home refinancing proposal is flawed. but this essay is at least worth reading for its spotlight on bond holder value that could easily absorb the problem and would place responsibility in the right place.
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