- Sep 5, 2007
I think we could have burnt bondholders if we had, as Patrick Honohan in his report suggested, structured the guarantee differently.Are there any rational posters who think we could and should burn the senior bondholders?
If there are, please tell me how and why, in full and glorious detail, with no wishful thinking.
All the usual suspects who know full well, by the terms of the question, they are automatically excluded from replying, please respect those terms.
Unfortunately because of previous mistakes the level of money that could be saved now makes it less worthwhile. Not completely worthless but definitely less worthwhile.
PH clearly felt that if the guarantee had not been so extensive then sharing losses with senior bondholders would be/is an option.Nevertheless, the extent of the cover provided (including to outstanding long-term bonds) can – even without the benefit of hindsight – be criticised inasmuch as it complicated and narrowed the eventual resolution options for the failing institutions and increased the State‘s potential share of the losses.
So we can still share losses with the remaining un-guaranteed senior bondholders but the benefit of doing so is reduced by having repaying most over the guaranteed period.