Allegedly, this is supposed to put the bailout burden on borrowers as opposed to the taxpayers.
The big question is who will buy these? The piece states Hedge Funds and Insurance Companies. Would these two entities really invest huge sums on a product that seems very risky, as the banks can suspend payments, when in trouble. My guess is that the real buyers will be other banks.
Reading between the lines, it seems like Cocos give the ECB more power. When these instruments blow up, the ECB will be the buyer of last resort, and the taxpayers end up paying, anyway, in the form of a devalued Euro.
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“Life does not ask what we want. It presents us with options”
― Thomas Sowell
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