And more effective insolvency regimes would make decentralized workouts more feasible, particularly in cases where systemic stress is better contained. The various experiences since the late 80s with buybacks, partial guarantees, and debt exchanges provide some hints for how targeted deployment of public moneys can spur tendencies in a direction consistent with public policy goals.
Such creativity is essential if we are to get beyond stark and unpalatable choices entailing either massive bailouts or sweeping defaults. Finally, a successful market-based, case-by-case approach also needs to be principled. I would suggest that the essence of an effective case-by-case approach is the development of viable plans that link broad, generally acceptable principles to the particulars of a given situation.