Comment: I think that is just about correct

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I think that is just about correct

I would propose that the bankrupt bank be responsible for transferring loans to another institution which would oversee them rather than call them in. This would likely be a much smaller shock to the system, and much less disruptive to individuals. Instead of recieving a notice that the bank wants my mortgage paid off immediately I'd get a letter saying my loan has been sold to competitor X, and my payments will be redirected to that location. My bank maybe will only be able to sell my mortgage at 80% of face value to another bank (or 0% If my credit and payment history is that bad) but that is the market value of that asset that my bank is holding. Either way I still owe the same amount at the same terms, just to a different entity. Once all the assets are liquidated then the creditors of the bank get paid in order of senority, and yes the depositors should be senior to all other creditors. This is how a bankruptcy should work in the favor of the individual depositor or mortgage holder in order to maintain a strong banking sector. Shareholders know they are taking a risk, if the bank fails and they lose their investment that is on them, but they knew that all along.

Josh Brueggen
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