Stopping a Financial Crisis, the Swedish Way

The New York Times ^ | September 24, 2008 | CARTER DOUGHERTY

[Stayfree]

A 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?...

[Stayfree]

Maybe Congress has an out here!

[Notary Sojac]

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.

I'm likin' dese Swedish ideas a whole lot better than the Paulson plan, you betcha.

[too_cool_for_skool]

“[Sweden] extracted pounds of flesh from bank shareholders before writing checks. Banks had to write down losses and issue warrants to the government.”

Contrast that to the current bailout proposal, where we are just giving the money away.

[Notary Sojac]

BTTT - I’ve been saying all along that I’m not against intervention, I’m just against the Paulson plan. Now here is something I could go for.

[PGalt]

Interesting article by Carter Dougherty. Thanks for posting.

[ViLaLuz]

“Contrast that to the current bailout proposal, where we are just giving the money away.”

That’s called income redistribution.

[ScaniaBoy]

Yes, but... most of the money stayed with the state. We are still due a lot of tax reductions. However, the way to stop the crisis worked. If we’ve only had politicians who felt more for the taxpayers than the national budget, things would have been great.

I think there is a need for some intervention - basically the gov’t acting as lender of last resort, but then also to correct the accounting system. Just as several politicians and pundits have said now; do away with the mark-to-markets. Unrealized winnings should not be on the accounting sheets. If only the good and mighty could have noticed this during the boom we wouldn’t see such a bust now.