ABSTRACT
Chapter 15 provides a nutshell exposition of both the type of rationale that could justify a bankruptcy court-type institution at the international level, and a potential risk of creating such an institution. It elegantly simplifies, concentrating on the basic logic of the cases for and against. Weighing benefits and risks, Eaton concludes that a bankruptcy mechanism, if executed well, would be a useful addition to the international financial architecture. I agree with this view. He ends with two practical suggestions: first, the idea that the debtor moral hazard problem associated with a bankruptcy court might be reduced by requiring the debtor to make escrow payments that could be seized by creditors in the event of a standstill; and second, a lending tax on private creditors to reduce the moral hazard problem of official bail-outs. I will briefly return to these below.
