This certainly seems like a reasonable plan to me, but I am no financial expert like John McCainA banking system in crisis after the collapse of a housing bubble. An economy hemorrhaging jobs. A market-oriented government struggling to stem the panic.
Sound familiar?
It does to Sweden. The country was so far in the hole in 1992 — after years of imprudent regulation, short-sighted economic policy and the end of its property boom — that its banking system was, for all practical purposes, insolvent.
But Sweden took a different course than the one now being proposed by the United
States Treasury. And Swedish officials say there are lessons from their own nightmare that Washington may be missing.Sweden did not just bail out its financial institutions by having the government take over the bad debts. It extracted pounds of flesh from bank shareholders before writing checks. Banks had to write down losses and issue warrants to the government.
That strategy held banks responsible and turned the government into an owner. When distressed assets were sold, the profits flowed to taxpayers, and the government was able to recoup more money later by selling its shares in the companies as well.
Friday, September 26, 2008
Stopping a Financial Crisis, the Swedish Way
Very interesting article in the NY Times from Sept 22:
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2 comments:
Contrary to what the main stream media says, wall street as a whole (capitalism) should not be blamed for the actions and policies set forth by OUR congress. There are, in fact, corrupt men in wall street who partnered with corrupt men in government to engineer a win-win situation at the expense of the taxpayer. Capitalism (and our nation or any nation) will only survive when the good and virtuous people are running it. Which means, come this November, you must vote for good men and women who stand by principle and uphold our constitution and not just give lip service to causes that seem noble and just.
Nick,
I would fundamentally agree with you. This crisis was caused by the men at the top, and those that were trading these mortgage back securities, who were unable to understand the complexity of the securities and no one was able to effectively measure the risk associated with these investments.
Like the 90's tech bubble there was this myopia that we can ride this wave forever and never worry about hedging or assume that the market might turn down. Greed corrupted the good judgement of many professionals, that allowed this situation to spiral out of control.
I hear the majority of assets and other investment groups are fine, its just that a few banks bet too much and caused one division to bring the entire establishment down.
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