The Great Bond Bailout

Investors who own financial institutions' debt are getting bailed out. Is that the right policy?

Richard Drew / AP

You're ticked off about the bank bailouts. Furious. You think somebody — other than you and your fellow taxpayers — needs to pay. Let's try to work out who that somebody ought to be.

The banks' shareholders don't make a promising target. The stock prices of Citigroup and Bank of America, to name two especially dramatic examples, are down more than 90% from their 2007 peaks. There are arguments, relating to incentives for executives and future shareholders, for wiping out current shareholders at the most troubled banks. But that won't pay for anything — the shareholders simply don't have much more...

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