Between 2008 and 2010, 72 financial institutions rated by Moody’s defaulted on bonds worth US$318bn. From 1983 to 2007, there were 96 financial defaults, affecting “only” US$46bn in debt.

Given the severity of the recent crisis, it follows that the prospects of recovery for creditors were dim. Indeed, loan holders recovered far less from defaulted debt during the recent crisis than over the previous 20+ years. On bonds, however, recovery rates were little changed from before. A larger than usual share of distressed exchanges—a discounted repurchase of bonds or substitution for a new set of securities—explains the boost to recoveries during the latest crisis (30% of 2008-10 defaults versus 10% in 1983-2007). In other words, creditors took what they could get from teetering banks before the borrowers went bust and potentially left them with nothing.