Stopping a Financial Crisis, the Swedish Way

[Jaga]

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.

read more:
www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html?_r=1&ei=5070&emc=eta1&oref=slogin

[kaima]

Very interesting Jaga. I hope we have as much success and our politicians and financial specialists show as much wisdom.

For 700BN it seems we should be issued quite a bit of prime stock in the companies, and placing some controls on executive pay is quite reasonable. I would still go into negotiations requesting the top 100 officers in the company pay back the total last three year's pay and benefits before any deal is closed. They supposedly justified the excessive pay and benefits with 'high responsibility, high risk', of the position, so now it the time for them to take their lumps for incompetency. They bet, they lost, and now WE are paying. They should as well.

Kai

[freetobe]

Kai,
Well said. I have said the same. Ken Lay was lucky, he had a fatal heart attack and didn't do time. We can only hope that these culprits do not get off so easy. A question?, taxpayers are also shareowners, bond holders and investors overall in the failing financial institutions, is the promise of taypayer reimbursement not just a political ploy? do taxpayers who are investors in the failed institutions who have their investments preserved through government assistance to these companies get a reimbursement for their tax contributions to save the companies from default? I would think so. How about the corporate pirates who are also tax payers? Do they get a reimbursement? I for one, would not want prime or preferred stock in these companies.
My preference is a treasury security for every taxpayer equal to amount of their portion of the bailout based on what their IRS tax liability is. The bailout has to happen and Main Street has understand this and accept it. The rest of the world is experiencing similar crisis. Americans have to face up to the tough times ahead.