September 2, 2011
No bank likes to take a loss, especially those in Europe that already suffer from a toxic mix of thin capital, troubled financing and weak loan books.
But in the case of the proposed second bailout for Greece — the one that is supposed to make private investors feel the financial pain along with taxpayers — the biggest banks in Europe are on the road now promoting the plan.
It’s not that the banks are suddenly masochists. It’s that this first major bond restructuring in Europe’s long-festering debt crisis is shaping up as a much better deal for the banks than for the Greeks it is supposed to be helping.
Holders of the Greek bonds would get much better value than they could in the open market, while Greece would still owe a lot of money. What’s more, Greece would be surrendering a lot of its negotiating clout if, in the future, it needed to go back to the bailout bargaining table.
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