It has turned out, that they got a risk premium, without that there was a risk, as now, as the risk strikes, there is a bail out.

So if everything goes fine, you get the risk premium, if there is a problem you get the same as if you never had taken a risk, this is still a free lunch out of the others pocket. And that is not even what happend or what is planned in the next bail out.

In case of F&F there was all the time only a small risk premium, because a gov't bail out, was pretty expected, but e.g. AIG bond holders (and CDO insurance buyers) did get a big free lunch.

In the end, there was already critisism, that the gov't wiped out preferred shares in F&F, as this would have been the best bet for recapitalisation of small banks across the US, but now nobody wants to sink his money into a potentially insolvent company. To keep at least this channel open, the bond holder bail out, might have been reasonable, even with the other companies, but the best thing would be transparency, which companies are fundamentally sound, and which aren't, and the hand out of free lunches is annoying.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers