Mr. David McWilliams:

No, subordinated debt is strange. There are 14 other instances around the world of last resort guarantees, given when time is running out and confidence is shattered and the state has to step in or the alternative is a bank run and a total collapse of the banking system. We know from the Great Depression that this is not what you want. This causes recessions to turn into depressions. However, in all cases, there is a distinction between debt and equity for corporate finance receiverships. Equity like instruments are never included and subordinated or junior debt is subordinate to or underneath and at no stage did I ever imagine that such debt would be included and the reason is that it is known that in all corporate finance receiverships subordinated debt is an equity like instrument. It comes at the very, very last and has many more of the characteristics of a share than a bond. You get paid more to hold the subordinated debt, so you are being paid for the risk. If you are being paid for the risk over and above everybody else, when the risk materialises, you cannot expect to be paid in full.