Stopping a Financial Crisis, the Swedish Way

www.thelocal.se ^ | 09/07/2010 | www.thelocal.se

[WesternCulture]

Why Sweden survived and America didn't.. 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? Skip to next paragraph. Swedish National Debt Office.. Bo Lundgren, minister for fiscal and financial affairs during the 1992 crisis. Add to Portfolio Federal National Mortgage Association (Fannie Mae) Freddie Mac American International Group Go to your Portfolio » 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.p>

[NVDave]

Exactly correct. The Swedes made stupidity *painful* for the bankers.

The correct course of action when a bunch of bankers come sobbing to the government for a bailout, threatening “Bail us out! Or we’ll take down the economy with us!” is NOT to give them a boatload of money and tell them “Don’t do that again.” The solution is to hurt them and cause them pain. Without pain, there is no learning from their stupidity.

Bagehot (the father of central banking) said “Lend freely at high rates, on good collateral” when bankers come looking to a sovereign government as a lender of last resort with the people’s money. Instead, the Fed and Treasury lent at rock-bottom rates on insanely threadbare collateral, and as a result, the wrong message was sent.

[DUMBGRUNT]

A bit off topic.
Made your Jansson’s Temptation easy and tasty!

http://allrecipes.com/Recipe/janssons-temptation-janssons-frestelse/Detail.aspx
A keeper.
Thanks

[WesternCulture]

“A bit off topic.

Made your Jansson’s Temptation easy and tasty!

http://allrecipes.com/Recipe/janssons-temptation-janssons-frestelse/Detail.aspx

A keeper.

Thanks”

- Thank YOU a lot for putting trust in that recipe!

Best of Swedish Volvo-owner Regards:),

WesternCulture, Gothenburg

[CodeToad]

Just another one of WesternCulture's 'America Sucks! Europe is Better!' threads. Thread #32.