Go Back   Bloggingheads Community > Diavlog comments
FAQ Members List Calendar Search Today's Posts Mark Forums Read

Notices

Diavlog comments Post comments about particular diavlogs here.
(Users cannot create new threads.)

 
 
Thread Tools Display Modes
Prev Previous Post   Next Post Next
  #11  
Old 11-13-2011, 10:51 AM
Namazu Namazu is offline
 
Join Date: Jan 2007
Posts: 185
Default Re: Fernholz: Hack, Carney: Clueless

Quote:
Originally Posted by stephanie View Post
To a certain degree, although there's more to why larger banks can borrow more cheaply. But the problem is that doesn't support Timothy's point at all.

The other problem, of course, is that even if Timothy were correct that the creditors were as stupid as his assumptions would suggest -- that they were motivated by the expectations of a bailout -- that didn't happen. So we have people freely choosing to enter into a contract that turned out to be a bad decision, for whatever reason, and thus having to bear the cost of that. That's what is supposed to happen.
This isn't complicated, so let me try again: a company's cost of credit may decouple from the fundamental creditworthiness of the underlying business--if, for example, when push comes to shove, creditors believe they will be saved. That's been the case for our large banks, (until recently) for the peripheral European countries, and in the case of MF global. The exact state of mind of the bondholders is unimportant to the argument, unless there was a behind-the-scenes quid pro quo: in financial markets, perception is reality. The bondholders believed the company was more likely to fail without Corzine, a man with extraordinary connections. They bet wrong, but had MF not failed so spectacularly, who knows?
Reply With Quote
 


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off

Forum Jump


All times are GMT -4. The time now is 01:25 PM.


Powered by vBulletin® Version 3.8.7 Beta 1
Copyright ©2000 - 2020, vBulletin Solutions, Inc.