OT: The BailOut

Some excerpts from a great article by a writer for the New York Times, Carter Dougherty, published 22 Sep 08:

Sweden 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

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.

The final cost to Sweden ended up being less than 2 percent of its G.D.P. Some officials say they believe it was closer to zero, depending on how certain rates of return are calculated

Bo Lundgren was Sweden’s deputy minister of finance at the time. Mr. Lundgren even made the rounds in New York in early September, explaining what his country did in the early 1990s.

A few American commentators have proposed that the United States government extract equity from banks as a price for their rescue. But it does not seem to be under serious consideration yet in the Bush administration or Congress. The reason is not quite clear.

The Swedish crisis had strikingly similar origins to the American one, and its neighbors, Norway and Finland, were hobbled to the point of needing a government bailout to escape the morass as well.

Sweden told its banks to write down their losses promptly before coming to the state for recapitalization. Then came the imperative to bleed shareholders first. Mr. Lundgren recalls a conversation with Peter Wallenberg, at the time chairman of SEB, Sweden’s largest bank. Mr. Wallenberg, the scion of the country’s most famous family and steward of large chunks of its economy, heard that there would be no sacred cows. The Wallenbergs turned around and arranged a recapitalization on their own, obviating the need for a bailout. SEB turned a profit the following year, 1993.

“For every krona we put into the bank, we wanted the same influence,” Mr. Lundgren said. “That ensured that we did not have to go into certain banks at all.”

By the end of the crisis, the Swedish government had seized a vast portion of the banking sector, and the agency had mostly fulfilled its hard-nosed mandate to drain share capital before injecting cash. When markets stabilized, the Swedish state then reaped the benefits by taking the banks public again.

Soon after the plan was announced, the Swedish government found that international confidence returned more quickly than expected, easing pressure on its currency and bringing money back into the country. The center-left opposition, while wary that the government might yet let the banks off the hook, made its points about penalizing shareholders privately.

http://www.nytimes.com/2008/09/23/busin ... na.html?em

sorry your thread makes too much sense - something washington lost years ago. i say we take the powers in charge(bank execs. speculators etc) and string em up. the mexican kids can use them for pinata's. i got an email the other day which was interesting. the billions in bailouts going to the banks divided by the number of am citizens means about 150,000 per person . if we had that money we could afford our bills pay healthcare. and buy the things we need or want - thus dumping the money into the economy , creating jobs etc , etc. why not let the bad banks just fail? there will be new ones tomorrow!!!!!!!!!

I am always amazed that topics like this don't garner responses. If people would open their minds, and then their mouths, and understand their responsibilities in situations like this, my best guess is we'd have far fewer crises.

Events like these are important. When topics like this are there to argue (discuss), don't run and stick your head in the sand, speak up. OMG, someone brought up religion, or politics, or some personal agenda. Wow, I sure don't want any part of this. Someone might discover I haven't a clue what I believe or stand for. Wait. What do I believe? I'm right, aren't I? I mean, I know everything, why should I listen to input from others? I know they're all wrong.

For God's sake people, speak up and be heard. You might actually educate me into making some intelligent and rational decisions. Why do people come to this room? Why do people post questions on the forums? Why do we read them? Oh right, they're on topic.

My two cents worth on the economic crisis: We're in a world of hurt people. Now would be a good time to educate yourself on how not to get here on a personal level. There's a ton of information on cash management available. Does anyone in this wonderful group of people have any suggestions to help us out?

gb

Nah. The greedy on Wall Street have the money to just hold us hostages and keep a tight stranglehold on the economy (and the government). They won't be hurting, they've got the money!!!

Patch up the old car and keep it running a couple more years. Stay put in the house you're in, you got by w/it this long. Send your kid to the local college for now, and to one of the smaller, less-expensive universities later, be sure their college credits will transfer. Eat home instead of out. Plant a small garden where and when weather permits. Reduce your cable or satellite packages. Or eliminate them. Go back to basics w/your telephone service. Opt for which is the cheapest way to go w/internet service, even if it means dropping back to slow dial-up. Turn those applicances and lights, including your 'puter, OFF when you're not using them. If you really do NEED a cell phone, buy a pre-paid and LIMIT your calls to NECESSARY calls and keep them short. Turn your heat down a notch or two and wear sweatshirts and sweaters around the house.

The government and Wall Street have relied too long on consumer credit spending to keep the economy afloat. Now its Wall Street's turn.

Well, a bail out deal has been worked out, and the House will likely vote Monday, with the Senate following on Tuesday or Wednesday. Guess who will pay the bill, for years and years to come? And almost unnoticed by everyone (except Detroit and our elected representatives), Congress voted to fund a $25 billion 'loan' to GM, Ford, and Chrysler to help them stop making gas guzzling bloated SUV's and trucks and turn out a few more fuel efficient cars and engines. Slipped that one on out the door very quietly, they did. As x said, "A billion here, a billion there, pretty soon you're talking about real money."

I don't question that there are real problems with the economy. I DO question why the tax payer always seems to end up funding the cleanup of the mess. Corporate executives screw up, but the public gets to clean up. Chrysler has been down this road before, but it was cheaper then... only $1.2 billion. So have the airlines in 2001, and that was cheaper, too... 'only' $15 billion. I wonder what part of those 'loans' have been paid back?

These two 'toons sort of sum up my feelings this weekend.






I'm so mad I can hardly see straight. Good thing I have my cpap to get me through the night. I am calm..... I am peaceful... I can clearly see the heads of the CEOs of Lehman, Bear Stearns, WaMu, Merrill Lynch, Fannie and Freddie as they struggle while I hold them under the surface of a clear deep lake in my special place.......
.

One of these days people are gonn'a get mad enough not to take it any more.

I'm already there ... I'm voting third party from now on til I can't vote no more.

I did send warning messages this past week to my US congressional reps, and both the Obama and McCain camps too!

DreamStalker wrote:One of these days people are gonn'a get mad enough not to take it any more.

I'm already there ... I'm voting third party from now on til I can't vote no more.

I did send warning messages this past week to my US congressional reps, and both the Obama and McCain camps too!

Hell, I've been calling for another tea party for 25 years and no one will listen...LOL

There is always the Ted Nugent approach. Vote out of office every member of congress who votes for this plan.

To be truthful, I'm unclear on this, but isn't there the option of a Present "vote"? And also the option of their electing to not have each vote "recorded"? Just a majority/minority vote so that the NUMBER of votes for and against is recorded but NOT how each member voted?

I'm REALLY gonna wanna know how Michigan's Levin, Stabenow and Camp vote on this. Are we gonna have to sit up in the middle of the night to watch to see how each votes? Is each one gonna make some long-winded speech before casting his/her vote? Or will the vote be taken w/o comments allowed?

Slinky, here is a link that will let you know how your people voted or vote on upcoming bills. It's the Washington Post, no agenda or slant that I know about on this project, and you can search by lots of parameters including late-night votes, for those items done in the dark that someone hopes will not see the light of day!

http://projects.washingtonpost.com/congress/


I say we hold the Congress accountable, since we the people won't get to hold the "bankers" accountable.
Chris

Thank you, Lookin4Sleep! I so appreciate that link! 10 AM today:

House Judiciary (10 a.m.): Commercial and Administrative Law Subcommittee holds a hearing on whether Chapter 11 of the Bankruptcy Code and the 2005 amendments to the Code respond to the financial distress that today's businesses face.

Whoopee doo! Why not give serious consideration to the Bankruptcy code for individuals??? In the somewhat recent past our "government" made it HARDER for INDIVIDUALS to seek bankruptcy protection but EASIER for businesses. Now they wanna make it even easier for businesses??? These pols are so OBVIOUS about WHO REALLY matters to them! And it "ain't" us!!!!!

Slinky wrote:These pols are so OBVIOUS about WHO REALLY matters to them! And it "ain't" us!!!!!

It's true - corporations seem to have more power and influence - even rights - than mere humans. The system is totally screwed. There should be true corporate accountability for this kind of crap. The Swedish method seems practical. There should be a way for ordinary citizens to a. measure whether a corporation is actually doing more harm than good, and b. to just kill a corporation that is more harmful than good. 'Good' would be a measure of the ability for a corporation to build sustainable community and environment. Anything else should be considered a sick corporation to be either 'spayed/neutered' or 'put down' like a horse with four broken legs.

Hey, JeffH, another tea party sounds you're on the right path. How about each "district" starting a Recall petition for their Senator and Congressman as a current version of the tea party???