I agree with you that CoCos are bad for the buyer. But not necessarily for the issuer. The interesting question is who is the holder for these, and if I had to take a guess its likely going to be the dumbest money in the room (pension funds). They need the 8% yields to keep their balance sheets from ballooning out of control they they have been on a buying spree for all sorts of garbage like this and sub-prime auto loan. In the end, you and I will eventually have to pay for all the looses though increased city and state taxes. I'd be willing to wager that CoCos are not going to be the prime reason for the next big recession. The only way I can see them doing real damage to the financial institutions is if UBS owns DB cocos or vice versa. Then everyone is at risk for systematic failure.