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Even neoliberals can be reasonable people in times of crisis

by Starvid Sat Oct 4th, 2008 at 07:59:05 PM EST

Bo Lundgren was the chairman of the Swedish market-liberal and conservative Moderate party in 1999-2003 and his politics where characterised by what can only be called an utter obsession to cut taxes. After getting historically bad election results he resigned and was made the head of the Swedish National Debt Office due to his competent handling of the bank crisis of 1992. He was succeeded as chairman of the Moderate party by the more centrist Fredrik Reinfeldt, current Prime minister of Sweden.

And here we have an interesting and very recent interview with the Bo Lundgren. Hopefully it will give something of a Swedish perspective on the current unfolding crisis.


   


   
   
   
Ny roll i nytt krisläge

Riksgälden har de senaste veckorna pumpat ut statsskuldväxlar i rekordfart. Bo Lundgren är chef för Riksgälden. Under 90-talets svenska kris var han biträdande finansminister och en av hjärnorna bakom bankakuten.

New role in new crisis

The National Debt Office has been issuing treasury bills at record pace during the last few weeks. Bo Lundgren is the boss of the National Debt Office. During the Swedish crisis of the 90's he was assistant mininster of finance and one of the brains behind the Bank ER.

Hur ser du på finanskrisen?

- Det är samma typ av förlopp som i Sverige under 90-talet. Grundproblematiken är densamma. Man måste skapa förtroende. Det kapital som bankerna förlorat måste ersättas med nytt kapital, oavsett om det är den privata sidan eller staten som gör det. Men det är en helt annan storleksordning i USA. Det är mer svåröverskådligt. Och det är svårt att sätta ett pris på bankernas dåliga lån.

Vad tycker du om det amerikanska krispaketet?

- Jag var chockad när representanthuset sa nej, men det hade för lite delar som skulle kunna minska skattebetalarnas kostnader. Köper man de dåliga lånen till ett pris som är för högt - ja då sitter aktieägarna kvar med ägandet i bankerna samtidigt som skattebetalarna får ta en kostnad. Vi valde att vara mycket tuffare under 90-talet i Sverige. Vi resonerade att ska vi gå in med pengar, ja då antingen tar vi över hela banken eller så ska vi gå med motsvarande inflytande.

Är man rädd för att det blir en socialisering av bankerna?

- Ja, jag är själv marknadsliberal, men om det blir det en jordbävning i det finansiella systemet så får staten också socialisera banker eller vad som än krävs. So what? Det handlar inte om ideologi, det handlar om krishantering. Det hade uppenbarligen inte kongressledamöterna klart för sig.

Nu hyllas den "svenska modellen", men fanns det några baksidor med bankakuten?

- Nej. Det var i så fall att människor och företag som förköpt sig råkade mer illa ut än om det inte varit en stor bankkris. Men det handlade mer om krisen än om hanteringen. En gång kom Lasse Thunell (ansvarig för Securum) till mig: "Du Bosse, det här företaget utbildar också legosoldater för användning i Afrika." Sälj, sälj", svarade jag, säger Bo Lundberg och skrattar åt minnet.

- Det var helt bisarrt vilka lån Nordbanken hade gett ut.

Är Swedbank för stor för att gå omkull?

- Jag är inte politiker. Det finns inga garantier för banker i dag, det finns insättningsgarantier, men om det skulle bli systemrisker så är det klart att staten skulle hantera det. Om finansinspektionen säger att banken är stark och stabil så om jag har något råd att ge Jan Lidén så skulle jag säga "öppna böckerna". Under den svenska bankkrisen var vi oerhört öppna. En del ville att vi skulle mygla men det gjorde vi inte.

Många människor frågar sig: varför är det finanskris igen. Varför lär sig aldrig marknaden?

- Det blir i bland en eufori. Bubblor kommer vi alltid att ha, sedan kan de hanteras mindre bra. Många centralbanker höll ju ner räntan, så många banker kände att de inte tjänade några pengar på vanliga banklån. Istället tog de större risker för att få högre avkastning.

How do you look at the finance crisis?

- It's the same course of events we had in Sweden during the 90's. The basic problem is the same. You have to create trust. The capital the banks have lost must be replaced by new capital, no matter if it is the private side or the state which does this. But it's a completely different magnitude in the USA [compared to Sweden]. It's much harder to grasp. And it's hard to put a price on the bad loans of the banks.

What do you think about the American crisis package?

- I was shocked when the house of representatives said no, but it had too few parts that could lessen the costs for the taxpayers. If you buy the bad loans for a price which is too high - well, then the shareholders are still sitting there with the ownership of the banks while at the same time the taxpayers have to absorb a cost. We chose to be much tougher in Sweden during the 90's. We argued that if we're going to go in with money, well then we'll either take over the entire bank or we'll get a corresponding influence [to the amount of money put into the bank].

Are people scared we'll get a socialisation of the banks?

- Yes, I'm a market liberal myself, but if you get an earthquake in the financial system the state will have to socialise banks or whatever is necessary. So what? It's not about ideology, it's about crisis management. Something the members of Congress obviously hadn't understood.

Right now the "Swedish model" is being praised, did it have any downsides?

- No. In that case it was that people and companies that had bought too much got into more trouble than they'd been in if we hadn't got a banking crisis. But it was more about the crisis than the management. One day Lasse Thunell (in charge of Securum [the State company created to take over and sell bad credits from Nordbanken]) came over to me and said: "Hey, Bosse, this company trains mercenaries for use in Africa." "Sell, sell" I answered, says Bo Lundgren and laughs at the memory.

It was completely bizarre, the loans Nordbanken had issued [he says].

Is Swedbank [local bank whish supposedly is in some trouble] too big to fail?

- I'm not a politician. There are no guarantees for banks today, there is deposit insurance, but if systemic risks develop the state will of course deal with them. If the Financial Supervisory Authority says the bank is sound and stable then the advice I'd give Jan Lidén [CEO of Swedbank] would be to "open the books". During the Swedish bank crisis we were incredibly open. Some people wanted us to cheat but we didn't do that.

Many people ask themselves: why is there a finacial crisis again. Why does the market never learn?

- Sometimes you get an euphoria. We'll always have bubbles, then they can be managed in less than a good way. Many central banks kept interests down, so many banks felt they didn't make any money on ordinary loans. Instead they took greater risks to get higher returns.

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Well, all yesterday's "Serious People" who derided regulation and taxation and wanted to reduce government, are being reasonable now, aren't they?

They're in a position to see (or be advised on) the threadbare carpet and rotting floorboards beneath their feet, and the utter darkness of the abyss below. If the state can nail in a few planks, they'll hasten to declare: "I always did say the state was the carpenter of last resource, does a great job!"

As for the crisis, it just happened, as these things do. It's: "Here we are in time of crisis, and we simply cannot afford to do otherwise than... We are, after all, Serious People, and we will be Serious about this." Of course, not a word to say that their years of pushing for deregulation were in any way a cause of the crisis. No, these things are natural, "we'll always have bubbles", what matters is how they're managed, and we the Serious People are here to manage them."

What does this mean?

  1. we the Serious People are not taking responsibility
  2. we intend to stay in power/influential positions
  3. when things improve, we'll go back to pushing for the same crap as before.

Lundgren, Sarkozy, Barroso, same difference, same horse dung.
by afew (afew(a in a circle)eurotrib_dot_com) on Sun Oct 5th, 2008 at 08:43:11 AM EST
Do actual DREAMS count for anything?

I just got up from sleep; know how vivid a dream is if it's unfolding just as you wake up?

I'm in a basement that has been set up as a radio station .  There are 2 guys I almost recognize, they're fiddling with some radio equipment, setting it up, but then the action shifts, something "economic" has just occured, and they are taking the equipment down.  I ask what's going on and they say other people are moving in.  Next scene, same basement, there are dozens of women, ages in mid thirties, many with young children.  The basement is now a packed shelter for the homeless.  One woman asks another, "Weren't you going to set up your own INN?".  The woman replies, "Maybe in a few years".  

I wake up slowly, VERY depressed, with the feeling that a rat just died in my stomach.  Thought this would be a good place to tell this tale.

I HAVE A VERY BAD FEELING!

They tried to assimilate me. They failed.

by THE Twank (yatta blah blah @ blah.com) on Sun Oct 5th, 2008 at 10:11:51 AM EST


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