Sense on Cents

In the midst of my recent travels around Ireland I was asked the following question by an Irish businessman. “Larry, when investors purchase senior bonds issued by banks, don’t they take risk?” I informed this friendly chap that based on how capitalism is supposed to work, that yes, these senior bondholders just like every other investor supposedly take risk when making an investment of this type.

My new friend then inquired as to how and why in Ireland’s recent negotiations with the EU’s hierarchy that the senior bondholders of Irish banks were not compelled to take a haircut. Knowing that we did not have enough time to fully pursue all of the angles to this topic, I gained an up close and personal appreciation for the disgust that many Irish citizens have for the recent ‘supposed support’ Ireland received by the EU and the European Central Bank. (more…)