The counter argument to burning the bondholders

The counter argument to senior debt restructuring (which I proposed in my last blog) is made in today's Irish Times by Donal O'Mahony, global strategist at Davy's. The key points of his argument are summarised as follows:

• That senior bondholders are not risk investors are rank alongside ordinary depositors.
• That senior debt provides financing for credit creation far beyond that of ordinary deposit maturities. I found this an interesting argument that I had never heard of, or thought of, before.
• That the risk capital in the banks have already taken a substantial hit: equity shares €55bn in the total Irish banking sector and subordinate bonds €10bn, from liquidity management exercises.
• That the €35bn into Angle and Nationwide are the only bank injections that will end up in black holes and that the money ploughed into the rest of the banks (BoI, AIB, EBS) are "financial transactions" (yes, you heard right, merely a transaction, nothing to worry about!) with "legitimate expectations of longer term return." (What would Keynes say to this?Maybe or grandkids can leave us a note on our gravesides informing us of our return in AIB?)
• That the cost benefit analysis of imposing the senior losses would be adverse, as burning the bond holders may cause contagion throughout Europe and adversely impact on our bank and sovereign funding.

It's an argument at least. But he lost me when he spoke of our returns in the other banks, speaking of their bail-outs as mere "transactions".