NEW YORK (MarketWatch) — This isn’t about “bailing out Greece.” Yes, the Greeks owe about $500 billion, but they already have spent the money.
This is about bailing out the banks that lent to them.
The biggest creditors are French banks. The second biggest are the Germans. The third biggest are the British. I’ll bet a lot of Greek bonds are now held by hedge funds.
These are the people asking for public funds.
What’s happening in Europe right now isn’t a financial crisis. It’s a hostage crisis.
Once again, we are all being held hostage by a bunch of bankers. “Give us a bailout,” they’re saying, “or else the economy gets it!”
Maybe it’s time to call their bluff.
Perhaps Europe should let Greece default. Let it go bust. Force the bond holders to take their losses.
If you invest in a stock that falls, you don’t get made whole.
If you buy bonds in a company or institution that collapses, you don’t get your money back. So why here?
They call it “risk capital” for a reason.
This is Bear Stearns all over again. It’s AIG all over again.
People are going to scare you. They’ll say it will be just like Lehman Brothers Holdings Inc. LEHMQ-1.85% “If Greece goes bust, the whole financial system will go down.”
Maybe they’re right. But the burden of proof is on them.
After the high-finance fiascoes and thievery of the past few years, I will take some convincing. We were told we had to step in to rescue AIG to protect Grandma’s annuity, and then it turned out we were really protecting Goldman Sachs Group Inc. GS-0.02%
Greece, as I say, owes about $500 billion. But even if it defaults, all that money won’t be lost anyway. Greece won’t vanish from the world. What will happen instead is that the bond holders will be forced to take a haircut.