Holding company creditors already know they may get a haircut.

Reader comment on: Answering Felix Salmon

Submitted by Lyle (United States), Nov 21, 2009 12:16

In a bank case the FDIC (depositors) stands before everthing except the expenses of running the bank after being taken over. For example in the case of WaMu the holding company creditors got wiped out. Clearly anyone who invests in the holding companies should downgrade them a couple of notches after WaMu i.e. demand a higher interest rate. Banks might then have to hustle for more deposits as a basis to lend rather than playing games with their buddies on Wall Street and screwing Main Street. Make the banks go back to plain old banking with nothing fancy. Put the Glass Stiegel fire wall back up, forbidding banks to have a hedge fund hiding inside them (i.e. proprietary trading desk) essentially say that you may be a hedge fund or anything else but not both, as the AIG hedge fund (AIG FP) is what did them in.

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