Posted by: rp on the 23rd of Dec 2011 at 09:37 am
dylan- what most don’t understand is that a BAC failure is not an absolute. you know those blockbuster kiosks you still see everywhere? you know the flight you just books on delta or american airlines? yes, those and many, many others before and after were insolvent and declared bankruptcy protection yet those companies are still operating. what this does is to wipe out: first, all common stock holder interest (BAC stock), then the preferred stock, then the bonds, and so on….. you can (and probably will) lose every cent you put in BAC stock, if held until the end. that doesn’t mean BAC goes away. although i don’t entirely agree with the fact that BAC or any one mega-bank like BAC is really too big to fail, if a BAC, C, or JPM were to just shut the doors, it would have a domino effect that would take the rest of them down with it. therefore, the gov’t will make sure the doors stay open and the payment systems continue to function. however, if and when the ponzi scheme is up, the stakeholders, most certainly the stockholders, will have most likely seen all their equity wiped out. the public will not stand for tax-payer subsidized back-stopping of another big collapse of the banking system.