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At the center of the potential plan is a mechanism that would take bad assets off the balance sheets of financial companies, said people familiar with the matter, a device that echoes similar moves taken in past financial crises.

This is an exact copy of what we did in this country 15 years ago. It worked very well and the state ended up owning a lot of bank equity.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Fri Sep 19th, 2008 at 11:21:08 AM EST
What country are you referring to?

I would be very happy to see the US Govt. take ownership of most of these entities.  If the US Treasury could enjoy the kind of profits the IB's have seen over the past ten years we'd be in good shape.

The trouble is that the minute they begin to perform they will be "released" back into the wild.

by paving on Fri Sep 19th, 2008 at 04:09:24 PM EST
[ Parent ]
The subprime mortage crisis is almost a blue copy of what happened here in 1991-1994. Google "Securum".

The Swedish approach to the problem of tidying up after the banking crisis by transferring troubled debt to specialized asset management companies is often held up as an example for other countries to follow. The most unusual aspect of Securum was the great degree of independence given to the company, combined with the rather broad terms in which its assignment was formulated. The Swedish state, as owner, announced that the winding-up would be permitted to take considerable time and that it should proceed keeping the best interests of taxpayers in view. In all other respects, Securum's board and management were given a great deal of freedom in shaping the company's policies. Moreover, the board was dominated by experts, with representatives of the ministry and the political domain being a limited element.

Furthermore, the legal structure chosen was such that Securum's operations were not subject to the laws applying to financial institutions, particularly not the constraints imposed by the regulatory framework of banking legislation. The company was also allocated sufficiently substantial equity that the risk of the management needing to return to the owner and ask for more funds was virtually non-existent. Consequently, the material prospects of independence were good.

In a happy twist of fate, the guy who was put in charge of the swiftly created authourity "The Bank Support Committee" (generally called the "Bank ER") is now the the chairman of the Bank of Sweden, and another key person, Bo Lundgren, then minister of taxation (and later chairman of the liberal-conservative party) is now the head of the Swedish Debt Office.  

So for once we have smart expereinced people in exactly the right place to deal with this crisis.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sat Sep 20th, 2008 at 06:19:52 AM EST
[ Parent ]
the state ended up owning a lot of bank equity.

That's the missing bit in Paulson's plan - therefore there's no guarantee it will "work very well" this time around.

For everyone else: read starvid's excellent LQD: Learning from the Swedish banking crisis (March 18th, 2008)

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Sun Sep 21st, 2008 at 09:08:00 AM EST
[ Parent ]

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