• Uninsured depositors in the two banks the ECB claims are bankrupt receive equity in exchange for their deposits.
  
• Insured depositors in the two banks the ECB claims are bankrupt receive Cyprus government consols, redeemable at par in payment of Cypriot government taxes.
  
• Capital controls are instituted in the form of an exit tax equal to Cyprus' sovereign CDS spread on the day of the capital outflow.

Senior management
Equity holders
Preferred equity holders
Subordinate creditors
Ordinary creditors, less insured deposits (including holders of collateralized debt for which the collateral proved inadequate)
Senior creditors
Insured depositors holding foreign currency deposits (non-€ deposits if in the Eurozone)
The ECB (if in the €Z)
Foreign residents holding insured deposits in local currency (in € if in the €Z)
The central bank (if not in the Eurozone)

And since the central bank of a non-€Z country is inexhaustible insofar as covering local currency obligations is concerned, this is where the buck stops.

Now, if and when you come out forcefully in favor of having the ECB do its job and eat the losses to €-denominated €Z sovereign bonds and €-denominated €Z insured deposits, then all your talk about about Cyprus getting what's coming to it might stop sounding like self-serving sanctimonious bullshit.

But right now, the enemy of the ECB is my friend. And if that means supporting a two-bit tax fraud haven, then I guess I can accept that stopping an out-of-control central bank run by insane partisan ideologues makes strange bedfellows.

- Jake

Friends come and go. Enemies accumulate.