"we are laying the foundations of the next systemic crisis"

Yves Smith reads Buiter too:

"One of the reasons I am a fan of Willem Buiter is that he is bracingly candid about his likes and dislikes. And we happen to share a major dislike, namely, the conduct and policies of Henry Paulson.

Buiter lambasts Paulson's gift capital provided to nine large US banks. What is striking is that Buiter is genuinely outraged, seeing this as a very bad deal for the taxpayer and providing all the wrong incentives to the miscreants recipients."

Here's Buiter:

"That, I would argue, is scandalous, both from a fairness perspective and from the point of view of the moral hazard this creates, by boosting the incentives for future reckless lending to elephantesquely large financial enterprises. Unless not only the existing shareholders of the banks benefiting from these capital injections but also the holders of the banks’ unsecured debt (junior and senior) and all other creditors of the bank (with the possible exception of retail depositors up to some appropriate limit) are made to pay a painful penalty for investing in excessively risky if not outright dodgy ventures, we are laying the foundations of the next systemic crisis, even as we are struggling to escape from the current one."

I agree.