William Shakespeare’s Julius Caesar is a tragedy told in four acts. Early in the play, Casca and Cassius are discussing a speech by Cicero and today’s title is drawn from that conversation. As Casca tells the story, those in attendance seemed to appreciate Cicero’s oration but, to a Roman, the words were meaningless. Some people may find the current headlines about the Greek economy equally foreign, so I thought I’d try to provide a translation.

Let me begin by relating the Greek situation to the US economic crisis of 2008. One of the companies which was saved was the insurance giant AIG. Why was it chosen while other companies were allowed to fail? The basic answer is what’s known in economic circles as “counter-party” risk. Before lending, most investors try to protect themselves by at least checking a company’s credit rating but many go further and purchase insurance. Prior to the crisis, AIG had been offering insurance against the default of those extremely complicated mortgage-backed bonds which were being pushed by virtually all US brokerage firms. As the value of those bonds was called into question, the likelihood of AIG having to pay billions of dollars in claims grew.

The British AIG office which sold the bond insurance had collected millions of dollars in premiums but hadn’t done a thorough job of evaluating the potential risks. Had AIG been required to make good on all the claims it faced, it would have been forced out of business. That potential failure represented significant counter-party risk to all of those whom AIG insured and that’s what made its bailout seem appropriate to our government officials. The Federal Reserve made an enormous line of credit available and AIG used it to pay claims; those who had purchased insurance received the benefit they had contracted for. Cynics note that Goldman Sachs was among the largest recipients of these payouts and is also a company well-represented at the highest levels of our government.

A very different scenario was considered and discarded, a systematic “unwinding” of AIG’s positions through bankruptcy or liquidation. This is the general approach being planned for Greece. Instead of fully repaying creditors at government expense, they will receive only partial repayment. In the interest of fairness, such losses are almost always taken pro rata, with each investor receiving the same percentage of the amount owed. This strategy is common enough that those discounts from full repayment have a name: “the haircut”, a term you have probably heard in relation to the Greek settlement. Under the current plan, owners of Greek bonds would be reimbursed for only about half of their face value, i.e., each would receive a 50% haircut. Since those bonds have recently been selling at discounts of 50% to 60%, the markets seem to be expecting something along this line.

In exchange for the bailout from other EU governments, Greek citizens will be forced to accept significant changes in their lifestyles. I’m not sure the political labels democratic and socialist still have exact meanings but years of socialism have left most Greek workers in enviable, if unsustainable, job situations. Over the years, extra staffing, short work weeks and early retirement were traded for labor peace. From this side of the Atlantic, retirement at fifty seems like a fairy tale and we wonder why the Greeks have reacted so strongly but that’s simply the social contract. Just as our country once promised a lifetime of middle class employment to high school-educated auto workers who were willing to “check their brains at the door”, Greek workers have planned their lives around those deals struck with the government. It’s clear that things must be normalized but it’s also clear that disruptions are going to spread through the Greek economy during the transition.

Prime Minister Georgios Papandreou asked that the bailout question be put to the populace, an uncharacteristically democratic strategy which led to the failure of his government. No politician wants to be hated by his constituents and Papandreou apparently decided that effective resignation was preferable to waging a long and politically damaging fight.

As progress is made on the restructuring front, I think it’s worth asking who Greece’s counter-parties are. The largest of them are banks from other EU nations but the list probably also includes you and me. Just as our money market and bond mutual funds were owners of 2008′s mortgage-backed bonds, they may very well be owners of today’s Greek bonds. The managers’ quest for high yields with which to entice us has proven once again that there’s no investing reward to be had without commensurate risk.

The scene which provided my title also offers the words with which I’ll bring this article to a close. Considering the political posturing which is taking place in Greece, across the European Union and in our own country maybe this will seem appropriate: “There was more foolery yet, if only I could remember it.” Unfortunately, most of us are going to be able to remember this situation much more clearly than we might prefer.