by Jerome a Paris
Fri Mar 6th, 2009 at 08:08:03 AM EST
“We must grasp that a modern insolvency law is a better way to overcome such a crisis than the state taking taking a stake,” Wolfgang Schaeuble, interior minister, told newspaper Handelsblatt.
“Our modern insolvency law is not set on the destruction but on the preservation of economic assets. The public perception is that insolvency is akin to going bust or bankrupt. But that is wrong,” he added.
Strong words, and finally a bit of sense on the banking crisis, from Schäuble?
Alas, not. Such tough lot is reserved for the car industry (GM's European subsidiary Opel, in this case). There's certainly an intellectual case to be made to let the car industry go down the tubes (global overcapacity, poorly managed companies, unsustainable sector in the long term in the face of depleting reserves and climate change) but the double standards with the treatment of the banking sector are staggering. It is not clear that letting the automobile industry collapse will not cause more economic damage than not helping out the financial world, and while it is already obvious that the several layers of bank bailouts have failed utterly (as expected by many), there still is no attempt to let insolvency law take over. Why?
Could it be that the only pundits we listen to these days are financial analysts, ie hardly disinterested parties? That politicians, pundits, lobbyists and financiers increasingly constitute one indistinguishable group of like-minded drones that consider Wall St and the City as the center of the world and see industry as outdated, almost by definition?
The result is that we've wasted trillions on uselessly propping up the financiers, are creating skewed incentives for other failing incumbents to claim similar largesse, and are wasting an opportunity to actually rebuild on sounder foundations (new infrastructure, public transportation, renewable energy, sane government, social equity).