1. Why Bail-In Securities Are Fool's Gold
- Author:
- Avinash D. Persaud
- Publication Date:
- 11-2014
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Bailouts and bail-ins of failing financial institutions have been hotly disputed in the global financial crisis of the last five years. At the height of the crisis, several failing banks were bailed out with taxpayer money so they could service their debts, but as public outrage mounts, policymakers are increasingly looking at bailing in these institutions before using taxpayer funds. Bail-ins, also called haircuts, require the troubled institution's creditors to write off some of the debt or agree to a restructuring of the debt, which reduces their holdings. The public has demanded the imposition of these costs on creditors and bond - holders, arguing that if bad lending as well as bad borrowing went unpunished it would be encouraged. Additionally, the yawning fiscal deficits that have followed bailouts have led to unpopular fiscal retrenchment.
- Topic:
- Debt, Economics, Markets, Financial Crisis, and Reform
- Political Geography:
- United States