From the New York Times: http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html?em
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?
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 Unietd 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.
“If I go into a bank,” said Bo Lundgren,
who was Sweden’s finance minister at the time, “I’d rather get equity
so that there is some upside for the taxpayer.”
Sweden spent 4 percent of its gross domestic product,
or 65 billion kronor, the equivalent of $11.7 billion at the time, or
$18.3 billion in today’s dollars, to rescue ailing banks. That is
slightly less, proportionate to the national economy, than the $700
billion, or roughly 5 percent of gross domestic product, that the Bush
administration estimates its own move will cost in the United States.
But
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……
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.
More money may yet come into
official coffers. The government still owns 19.9 percent of Nordea, a
Stockholm bank that was fully nationalized and is now a highly regarded
giant in Scandinavia and the Baltic Sea region.
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I guess it would make too damn much sense.
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