It's good to see The Economist's Free Exchange blog get after Simon Johnson for making absolutely no sense. The guy just keeps lobbing up softballs, like this, on CIT:
[I]t would be straightforward to refinance this part of CIT’s business without bailing out CIT’s creditors, and definitely without keeping top CIT executives in place; this is the essence of “negotiated conservatorship,” which is a proven model in the US.The "negotiated conservatorship" model refers to the resolution of Continental Illinois in 1984. Johnson claims that not bailing out a bank's creditors and firing its top executives is the "essence" of the negotiated conservatorship model. Except, of course, the essence of the Continental Illinois resolution is that the FDIC bailed out Continental's creditors. The fact that the FDIC eschewed the $100,000 cap on deposit insurance and promised to protect all of Continental's depositors and other general creditors is what made it so controversial. So yet again, Johnson has no clue what he's talking about.