So the Dutch state’s ING guarantee got it 100 percent wrong. It does very little to stimulate new lending to the real economy. Instead it subsidises/bails out the owners and unsecured creditors of a bank that holds large stocks of (bad) assets, that is, those who in the past have (carelessly/unwisely) extended credit to the bank. This maximises moral hazard for very little gain in systemic financial stability and for very little direct stimulus to new lending. It also incentivises the bank to hoard capital and liquidity to enable it to pay off its obligations to the state and regain its operational independence as soon as possible. Finally, it exacerbates the tendency to restrict cross-border banking, quite possibly to a degree that could harm the efficient diversification of asset and funding risk. This deeply defective bail-out should not be repeated, in the Netherlands or elsewhere.