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It will force them to acquire the capital they need to be safe, either in the stock market or from the government. This is bad for stock holders, but good for bondholders.


I have no way of knowing for sure but the government action in the Chrysler case leads me to doubt that the bond holders would be guaranteed by the government.

It looks like that in that case the bondholders are being forced to the back of the list and are being demonized as greedy by not accepting the Government proposed deal.

Whats to keep the govt from insisting on default as a condition for providing more capital?

I do not write this as a political question, I just want to know what risk comes with government backing in the current political climate.

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