But, while debt forgiveness benefits holders of both equity and debt, debt holders don t voluntarily agree to it for two reasons.

But holders of US debt worldwide have every reason to be concerned.

Alternatively, the debt holders can agree to reduce the face value of debt, in exchange for some warrants.

Based on those values, contracts with existing equity and debt holders should then be restructured.

Even talk of a government bailout reduces the debt holders incentive to act, making the bailout more necessary.

But this ignores the fact that holders of the very same debt will be among the supposedly burdened future generations.

The budget cost increases every year, as more of the debt rolls over and that does not include agency debt and the large increase in the current account deficit to pay China, Japan, and other foreign holders of US debt.

Holders of Greek debt maturing now are repaid courtesy of the 110 billion bailout program, and holders of Irish bank bonds have been given a guarantee by the Irish government, whose promises have in turn been underwritten by the EFSF.

Surprisingly, the bond market still seems almost oblivious to this risk. But holders of US debt worldwide have every reason to be concerned.

It would be better to give the European Stability Mechanism, the ECB, and other official holders of sovereign debt the haircuts that they deserve.

If Greece were forced to restructure its debt and impose a haircut on holders of its bonds, the ECB would incur a sizeable loss.

How the resulting losses imposed on debt holders will be divided between the various eurozone institutions and the IMF is anyone s guess.

And inflation is like default a capital levy on holders of public debt, as it reduces the real value of nominal liabilities at fixed interest rates.

Banks and bond holders had lost hundreds of millions of dollars, but opted to restructure his debt to avoid the risk of losing more money in court.

Unfortunately, the Obama administration s decision to put the unions ahead of secured debt holders in the orchestrated Chrysler bankruptcy risks rupturing the basic fabric of credit markets.

Certainly, a key part of the solution is to allow more banks to fail, ensuring that depositors are paid off in full, but not necessarily debt holders.

Reports of mandate holders

If the losses are big enough that existing equity and debt holders are wiped out, government insurers should make up the difference to protect depositors.

The principle is exactly the same when the holders of the national debt are foreigners (as with Greece), though the political opposition to repayment will be much greater.

holders of high national office

(a) Appointment of mandate holders

This means that the Irish government (maybe the next one) should demand that holders of bank bonds share the losses, perhaps by offering them a simple debt equity swap.

Reports of mandate holders 41 13

Under Chapter 11, companies with a solid underlying business generally swap debt for equity. Old equity holders are wiped out and old debt claims are transformed into equity claims in the new entity which continues operating with a new capital structure.

Prior to its 2005 sovereign debt exchange, its legislature enacted a lock law, which barred the way to any future offers to holders of bonds on which Argentina defaulted in 2002.

By the trustee retaining a higher proportion of early regular budget contributions, the bond holders would be assured that the annual debt service requirement would be met in a timely manner.

C. Selection of special procedures mandate holders

Segment 2 working methods of mandate holders

Holders of promissory notes and negotiable documents

When a sufficient proportion of creditors agree to a restructuring plan (in the case of Argentina, the holders of more than 90 of the country s debt did), the others can be forced to go along.

But that required, at some point, allowing some bank to fail, and persuading some debt holders and counterparties that the government guarantee of support to institutions that were too big to fail was not certain.

Meeting with special procedures mandate holders

Time frames, office holders and priorities

But just think how different everything would look if America had a trade surplus and a more manageable level of domestic borrowing than the 14 trillion run up in debt by credit card holders before 2007.

My heart with you oh you holders of the light

C. Selection of special procedures mandate holders 14 16 8

(b) Disclosure of the office holders to be held accountable

Certainly, a key part of the solution is to allow more banks to fail, ensuring that depositors are paid off in full, but not necessarily debt holders. But this route is going to be costly and painful.

23 Bond holders were offered three options.

C. Interaction with special procedures mandate holders

In January 2005, the Argentine Government presented bond holders with a new debt restructuring deal, involving 152 bonds denominated in six different currencies amounting to roughly 82 billion and subject to eight legal jurisdictions.

Making the necessary modifications is a delicate task rendered more difficult by the fact that many mortgages have been sliced up and repackaged in the form of collateralized debt obligations. The holders of the various slices have conflicting interests.

If such a contingent capital structure had been in place before the crisis, troubled banks would have been recapitalized by the contingent debt holders while avoiding the complications and legal posturing inevitable in formal bankruptcy.

Time frames, office holders and priorities for implementation

Time frames, office holders and priorities for implementation