Professor Alan Ahearne:

It was. I mean, I remember being in conversations - during the summer I think it was or maybe early autumn - in the Attorney General's office with several senior counsel. I am not a lawyer but just listening to the conversation, it was clear that it was much easier to put losses, legally, on subordinated bondholders than on senior bondholders. Subordinated debt, as I understood the conversation, is explicitly subordinated. So after all capital has been wiped out, you can then go to the subordinated debt and put losses on them. But senior bonds are not subordinated to deposits, for example. So, in a liquidation if you liquidated a hotel, you cannot treat the bill that is owed ... money owed to the launderette different from the money that is owed to the meat supplier. They are senior creditors. Unsecured senior creditors all treated equally and that was the position of the senior bonds. They were pari passuor equal in the eyes of the law to depositors ... much more difficult game. Now, maybe it can be done but it was clearly a much more complicated operation.