Adding a little more to my above post … If I were to draw the above transaction, the picture would show two solvent parties on each side of the Tx trying to do business through two insolvent parties. The solution seems pretty simple — remove the two insolvent parties (the banks) in the center. Now, I’m sure this will cause some short-term pain, but this is by no means an intractable problem. Either the two solvent parties do business directly with each other or the two solvent parties find another solvent party or two to act as intermediaries.
I don’t know, I’m just not seeing how this is so difficult to solve, unless, three or more of the four parties are insolvent as opposed to just the two banks being insolvent. That may be what is really happening, in which case, the sole solvent party needs to find another party to deal with.
