I have a hard time feeling sorry for bondholders in these situations. There is always some risk in lending money. Perhaps they should try and find more creditworthy institutions next time.
A lot of money in the US is being lent with the assumption that creditors will always be bailed out by the state or federal government; that mindset exasperates excessive borrowing and spending at the local level and encourages creditors to make risky loans. This is the textbook definition of a moral hazard.
A lot of money in the US is being lent with the assumption that creditors will always be bailed out by the state or federal government; that mindset exasperates excessive borrowing and spending at the local level and encourages creditors to make risky loans. This is the textbook definition of a moral hazard.