"‘There were various discussions about Greece,’ such as whether the European Union or the International Monetary Fund should lead efforts to help out the country, Mr. Kan told reporters."
—- Japanese Finance Minister Naoto Kan (WSJ)
I had hoped that the G-7, out in the middle of nowhere, would have the freedom from distraction necessary to think about better ways of dealing with Greece and the other PIGS than an IMF bailout of the idiots who lent to these countries.
It would be fantastic if the Europeans developed a framework for taking over any financial institutions that would fail if Greece defaults. The government would take over the institution, guarantee that all commercial and derivative contracts would be paid, and then deal appropriately with all other contracts - equity and debt would be worthless, and management’s employment and bonus contracts would not be assumed by the new entity. Something that deals with systemic risk without introducing moral hazard.
Like what we needed when Lehman failed, and still do not have.
