Bailouts and Moral Hazard

Bailouts and Moral Hazard are not just for “banksters”.

The money quote from this piece about Nortel’s bankruptcy is:

“I’d rather end up on welfare than give our hard-earned assets to these vultures,” Mills said in the statement”

Mills admits he is not negotiating in good faith, with a taxpayer bailout of his personal finances enabling his ego and risky behavior. He is not living in reality, if he believes that the cash in Nortel’s bankruptcy estate is his asset.

There is another point to take home as well. When bad debts must be written off, creditors can become enraged tribalists, and project blame onto other tribes.

And there is irony. These so-callerd “vulture bond funds” are likely held in other workers’ pension funds.

http://newsandinsight.thomsonreuters.com/Bankruptcy/News/2013/01_-_January/Nortel_Networks_talks_on_dividing_cash_from_sales_end/