“What were the alternatives to the bailouts?”

In light of the Summer’s resignation, its worth looking at the question I still hear from time to time.

This article, Stopping a Financial Crisis, the Swedish Way, published exactly 2 years ago today, provides an answer:

“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 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.” (emphasis added)

The result of the Swedish method? They spent 4%  of GDP ($18.3 billion in today’s dollars), to rescue their banks. That is far less than the $trillions we have spent — somewhere between 15-20% of GDP.

Final cost to the Swedes? Less than 2% of G.D.P. (Some officials believe it was closer to zero, depending on how certain rates of return are calculated).

In the US, the final tally is years away from being calculated — and its likely to be many times what Sweden paid in GDP % terms.

Of all the articles that were ignored since the crisis began, this September 2008 Times piece is probably the most important.

>

Source:
Stopping a Financial Crisis, the Swedish Way
CARTER DOUGHERTY
NYT, September 22, 2008
http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html

Category: Bailouts, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

62 Responses to “We Should Have Gone Swedish . . .”

  1. clawback says:

    BR, for two years now I have repeatedly asked myself this question: “Dumb a**es or liars?” In other words, what explains Paulson, Bernanke, Geithner, et al.’s choice to save the banks AND the mgt AND the shareholders (to say nothing of bondholders and CDS counterparties)?

    Was it just panic and incompetence? Were they afraid of the CDS daisy chain, but afraid to be too explicit about it with Joe Q Public? Or were they really interested in saving their friends and colleagues at the major financial firms?

  2. Robespierre says:

    The US bailout was never about the banks or the financial system. It was about saving the main players (CEOs etc). In other words the ones that eventually will regard the public officials once they leave office (via speaker fees, plum positions in the industry etc). Once you understand that you will understand why we didn’t go Swedish…

  3. clawback says:

    Just read the Summers post below. BR wrote:

    “The Obama White House correctly forced the insolvent automakers into bankruptcy reorganization. They should have done the same with the insolvent banks and investment firms. That was impossible with the banker’s boys running the White House economic policy: The Rubin/Summers/Geithner team made sure that did not happen.”

    So, does that mean you’d go with choice C) Geithner, Summers, Bernanke, et al. just wanted to save their friends (rather than go Swedish)?

  4. DeDude says:

    It is what should have been done. But with all the idiots screaming soci@lism whenever government does anything, that one had no chance. Certainly not with a GOPster from GS being in charge.

  5. clawback says:

    DeDude,

    Was that it — the fears of “nationalizing” the banks, like that madman Hugo Chavez — is that the only thing that stood between John Thain and his $30K toilet? Did they really believe that, or was it just a useful tactic?

  6. JET55118 says:

    These articles make me want to cry. Why doesn’t congress take such an approach to failing financial institution? Articles like this one offer such reasonable advice; I just don’t understand why those in power won’t take this advice.

    I feel completely helpless to change anything- there is no way to get people in power who will actually do something intelligent and make the right choices. Despair seems to be my only option.

  7. Chief Tomahawk says:

    I have to wonder to what extent corporate earnings are ‘juiced’ by debt being rolled over at cheaper rates? This would seem to fit with the lack of organic growth evident on Main St. yet earnings approaching the pre-crash record highs. So what then happens when the refi game runs it’s course and Main St. still has the flu???

  8. NickAthens says:

    Thanks for reposting this. Everytime I start to get incensed over liberal bias, sensibility raises its ugly head over here. Don’t get me wrong, I despise the republicans more. After all, Dems always spend money, but under Nixon/Friedman when republicans embraced “deficits don’t matter, they quit being a guardian and succumbed to the same drug. Sure they may have incurred debt for different reasons like wars, tax cuts, defense spending, they went into debt just the same. I can’t see why we sholdn’t embrace “Too big must fail” in these cases.

    Now going off topic.

    We need better journalism to keep the public informed.

    We need to discard virtually all incumbents. Sometimes in business you just replace a layer of management and move everyone up a level and try again.

    Even better, we should outlaw unions for public service employees at every level. Even FDR would agree with this.
    Public servants shouldn’t be able to receive any pension before Social Security. I remember working at Lawrence Livermore Lab in the 70′s and one of their recruiting tools was NOT being part of the “system”.

    Please keep reminding us all of how Phill Gramm, Larry Summers, Alan greenspan, are the pawns that casued all this.

    I love the tactic of democrats saying “precisely what do you want to cut” knowing that immediately alients that voting block. Why don’t tea partiers respond with 33% across the board!

    Blood pressure rising must stop..best.

  9. Charlatan says:

    We know what we should have done with the banks. It’s obvious. But between the bank lobby and pro Wall Street shills in the media, we were BARELY able to pass the watered down crap we did.

    (Still amazed that Cramer didn’t take the slightest bit of heat for implying as part of his anti-legislation crusade that Paul Volcker had lost some of his faculties to age.)

  10. Greg0658 says:

    “that madman Hugo Chavez” .. he had some activity in .. the 1st days for me here at TBP .. was a (then) big 500 or so point drop day in a second or2 on Feb 27th 3+ years ago .. I found some data with that name in that time (what it t was exactly – forgot)

  11. san_fran_sam says:

    The Swedish Way, huh? Like the Republicants were ever going to let that happen.

  12. patient renter says:

    A lot of effort is put into constructing artificial opposing interests as a way of deflecting attention away from the real opposing interests. This issue, as with most, fit what BR said the other day:

    “the real debate is the corporatocracy versus the individual”

  13. DeDude says:

    @clawback;

    I believe that something like 2/3 of the GOPsters voted against their own president even after it was clear that a severe credit freeze was developing (after the first bailout legislation had failed and the second package was proposed). The main argument from those GOPsters, in defense of allowing a total collapse of our credit system (and therefore our – credit based – economy), was that the proposal was a soci@list gobinment takeover. That is also the main theme currently being thrown against what Obama has done to successfully get the economy out of the nosedive it was in when he took over.

    Do they really believe it? Depend on whether you are talking about the moron tea-bagging Joe six-pack honking the horn in his pick-up truck in protest against anything that may save him from the vultures, or the vultures who will not be denied. The later simply use the words that trigger phobias of the former as a tool to enrich themselves –they are not stupid enough to believe all that BS. The problem with the vultures putting little GOPster sock puppets in to scream soci@lism whenever someone try to restrain the vultures “meal-plans”, is that sometime these sock puppets end up believing the crap they are spewing out. So the GOPsters voting against the bail-outs probably believed that it was soci@lism. But no worry, for the vultures it worked out perfectly. The Dems could not force through a Swedish solution against a huge “soci@lism” push-back (even within their own right wing). So it was either allow an economic collapse (by doing nothing) or accept Poulson’s plan with a few strings of oversight attached.

  14. JimRino says:

    The question is who does Limbaugh SERVE.
    Not the American Public.

  15. dss says:

    I don’t know why anyone is surprised at the outcome of our bailouts. Since when did anyone in power do the right thing instead of the thing that enriches him, his cronies, and future employers? This is capitalism at it’s finest; socialism for the powerful, capitalism for everyone else. This is the way of the world, no surprises here.

  16. Super-Anon says:

    A government that runs deficits like ours doesn’t have any credibility to resolve financial crises.

    The belief that a bankrupt government that chronically runs deficits is capable of taking over the banking system and fixing it is completely irrational.

    The problems we have run much deeper — as a people we are not willing to spend only what we make.

    Until we go through a cultural change where we’re willing to live within our means everything else is tantamount to “re-arranging the deck chairs on the Titanic”.

  17. DeDude says:

    Personal responsibility, soci@lism, small government, individual freedom; those are just words the GOPster sock puppets are trained to spew out so they can get ordinary people to vote against their own interests. In private John Boehner mock the use of those words, in public he worships them. When you look at the actual legislation proposed by and passed from the GOP there is never any doubt who is going to lose when corporate interests are clashing with any of those fine sounding code words. But it doesn’t matter that GOPsters betray the ideals (that morons have been brainwashed to think that GOPsters defend). Because they can always sing the “tax-and-spend” jingle about the Dems to get the morons back in the fold and at least think of their GOPster candidate as the “least of two evils”. Even when things get a little out of hand for our masters and the Dems take over power, there is nothing to fear. The vultures have already gotten control over at least 1/3 of the most right wing part of that party. They are protected by these blue dog “democrats”, if anything “dangerous” starts gaining strength.

  18. clawback says:

    One crazy thing about TARP is that TARP didn’t do much of anything to calm the markets. Fed intervention in the CP and inter-bank markets, raising the FDIC limit to 250K, the (needlessly convoluted) TLGP that guaranteed new bank debt, AND (at long last) the repeal of mark-to-market, are what calmed the markets and saved the financial system from severe disruption. None of these things were in the TARP legislation. (This is the same argument made by former FDIC chair Bill Isaac — both in Sept. 2008 and in his new book.)

    TARP, in my view, just scared the crap out of people. People who had no idea there were problems (J6P) were suddenly told that the world was about to end. Meanwhile, people who knew there were problems suddenly wondered if they weren’t 10 times worse than they ever imagined (i.e. why would .gov be doing this unless the world was about to end?). This did wonders to calm the markets;)

    So, why did they do TARP and why did they scare the crap out of people when it was a range of non-TARP, non-legislative actions that actually helped things? Did they just screw up, or were they trying to save their friends?

  19. Apinak says:

    How much did the baiout cost? I only hear 2 numbers, the mainstream media will say it cost very little becasue most of TARP was paid back, the other number is the $14 trillion in costs and guarantees. The answer is somewhere in the middle, can’t we get some resolution on where?

  20. SteveC says:

    Barry, I nominate you to lead the Presidents economic team. (Seriously). These positions tend to get filled by old retreads and insiders, who try the same old ideas over and over, with lousy results. Unfortunately, the establishment of bankers, bond managers, and ideologues would fight your nomination all the way. The fact they would be upset probably means you’re doing something right.

  21. DeDude says:

    If 1986 told us anything it is that the economy and the stock markets are two separate things. Yes TARP did initially create more market turmoil but that is just fluctuating numbers. TARP saved borrowing and lending – the heart blood of a credit based economy. It did so at the price of inducing bigger market gyrations. The crisis had a few examples of perfectly good businesses that closed simply for a lack of available credit. Without TARP that problem would have snowballed out of control. A number of other actions were also needed and taken to address this and other problems, but a messy mass bankruptcy of all the big interconnected banks would instantly have frozen all credit in this country and very few businesses could have stayed open past the next payday under those conditions.

  22. clawback says:

    I don’t want to beat a dead horse, but all of those non-TARP actions DID prevent mass bankruptcies. TARP had nothing to do with it.

    The idea of injecting capital to increase lending doesn’t make sense when the terms are punitive and onerous (they should have punished mgt, not the balance sheet) — banks didn’t use TARP to increase lending because they never saw it as a (semi-) permanent addition to their capital. Instead, they did everything they could to pay it back — both to avoid the interest payments and (natch) the limits on executive comp.

  23. zozie says:

    In the end there were almost no repercussions for the financial firms that made it out alive. Record bonuses are a good indicator of how they fared. The precise answer as to why will take time to figure out, but to the outside observer it certainly looks like the fix was in.

  24. DL says:

    Those who bemoan the influence of bankers on the Federal government should not be so quick to criticize the Tea Party.

  25. obsvr-1 says:

    See the current TARP report http://www.sigtarp.gov/reports.shtml (download on the left)

    The Congressional Oversight Panel has released good reports, comprehensive and exhaustive review of the TARP and many programs under and associated with TARP.

    For the question of We Should Have Gone Swedish . . . Yes, or at least a modified Swedish plan to first focus on goals of stabilization, short term remedy and resolution, analysis, adjust and refine for long term sustainability. Non-goals – saving anyone.

    1. kick out exec management and root out bad actors throughout the organization
    2. recover ill gotten gains, compensation and bonus claw back on illusory gains
    3. restructure ownership based on new cash and guarantees – haircuts or total loss across the capital structure.
    4. viable business plan for sustainable recovery or resolution/wind down
    5. priority on compensating gov’t (taxpayer) for guarantees and cash infusion

    The stigma of nationalism or socialism needs to be eliminated, such that if the gov’t has to step in to bailout a firm (industry) that the investor structure (ownership) has changed to an entity with the number one priority as stewardship and best interest of taxpayer funds. If the goal is to return the firm to a private sector entity then it is not nationalism or socialism. Any reference to being similar to Hugo Chavez or other dictator lead regime is ludicrous.

  26. Tarkus says:

    I think Sen Levin was the one who said of Capitol Hill “The bankers own the place.”

    That pretty much explains why they didn’t go Swedish. And Levin wasn’t talking about just one party either.

  27. DeDude says:

    TARP was to quickly prevent mass panic and mass bankruptcies as a result of the mass panic. When everybody fear that everybody else could be declare bankcrupt tomorrow, then all lending stops. I have lots of problems with TARP, but there is no doubt that it it stopped the panic and that without it, the big institutions would have fallen like dominoes. It was not that the TARP money itself was used to lend, it was that it prevented the panic and collapse and therefore ensured the continued existence of the institutions that could lend. The other actions (including accounting rules) were also important in securing continuation of the big banks. I also have issues with many of them although temporarily floating the big institutions until you have a process to dismantle them probably is a good thing. Financial reform was a huge disappointment – although it was the best that could get through a legislative process where the Wall Street leaches own almost all the GOPsters and at least 1/3 or the Dems.

  28. b_thunder says:

    Government of, for and by the people vs Government of, for , and by the special interests

  29. DeDude says:

    “Those who bemoan the influence of bankers on the Federal government should not be so quick to criticize the Tea Party”

    Look at who is financing those tea parties. The only thing those clowns are doing is reducing the influence and power of the progressive part of the Democratic party – and that serves Wall Street perfectly. No big gobinment to stay in the way of big business and its exploitation of the people – that serves Wall Street perfectly. I will stop being critical of the tea parties when they stop serving Wall Street.

  30. mrmike23 says:

    Hindsight is 20/20. If you are so brilliant and cognizant about what should have been done, BR, why were you not screaming to anyone who would listen?

  31. dss says:

    The Tea Party serves as a perfect foil for those who are financing them. Fire up the ignorant populace who will get self serving media time from the corporate masters and make the movement seem more pervasive and influential than it really is.

    Just more idiots carrying pitchforks and torches while protesting and voting against their self interest while the man behind the curtain laughs all the way to the bank.

    The corporate party will win in November, D’s, R’s, and I’s are irrelevant these days.

  32. clawback says:

    I have lots of problems with TARP, but there is no doubt that it it stopped the panic and that without it, the big institutions would have fallen like dominoes. It was not that the TARP money itself was used to lend, it was that it prevented the panic and collapse and therefore ensured the continued existence of the institutions that could lend.

    “no doubt”? You’d have to argue that. If you look at inter-bank lending (the actual FRBNY data, not the hype about the “freeze”) TARP had no discernible effect. Instead, it was the ballooning of the Fed’s balance sheet and interest on reserves late in 2008 that helped that market — and ironically, inter-bank lending actually went DOWN at that point because banks used the Fed as much as each other.
    http://www.voxeu.org/index.php?q=node/4941 (Check out that chart)

    Also, the change to FAS 157 didn’t just help a little bit — it was instrumental to saving the banks. Remember, insolvency is largely a legal/regulatory distinction. An insolvent bank (or national govt.) can zombie along so long as it can fund its obligations. The items on the balance sheets didn’t change in April 2009 so much as the values of certain assets were marked up — thereby increasing the banks “capital”.

    Dean Baker has a great new piece along these lines: http://dailybail.com/home/tale-of-the-tarp-two-years-later-how-the-elite-media-perpetu.html

  33. clawback says:

    “Hindsight is 20/20. If you are so brilliant and cognizant about what should have been done, BR, why were you not screaming to anyone who would listen?”

    In Jan 2009, BR wrote this: http://www.ritholtz.com/blog/2009/01/time-to-get-swedish/

    In Marchc 2009, he posted this: http://www.ritholtz.com/blog/2009/03/lessons-from-sweden/

  34. DeDude says:

    @Apinak;

    The 14 Trillion number is pure BS. It includes a lot of commitments to give loans that never were given (and never will be). CNN has a bailout tracker that at least is fairly honest http://money.cnn.com/news/storysupplement/economy/bailouttracker/ on the facts. According to that a total of 3 Trillion has been invested (of 11 Trillion “committed”) and most of that is asset backed loans that will be paid back again unless the economy completely collapses (and then we don’t have to worry because we will default on out debt whether it is 3 Trillion or 300 Trillion).

  35. Tarkus says:

    @clawback

    I stand corrected. I was Durbin.

    Though, if Big Daddy Fed is going to create money out of thin air and give it to big banks, how could they not own Capitol Hill…?

  36. Tarkus says:

    Correction – It was Durbin.

  37. DeDude says:

    A panic stopped before it takes off, is very difficult to document. If you let the lemming run over the cliff you have a lot of dead lemmings to document the panic. If you stop them before they get to the edge, everybody will say oh they stopped for some other reason or would have stopped all by themselves anyway. Interbank lending had nothing to do with stopping the panic. Off course the banks would rather lend from the fed than from each other if that is the cheapest and safest available option. So interbank lending is a poor parameter to judge issues of trust and panic.

    I agree that FAS 157 prevented the second phase of the impending disaster because it allowed the banks to disguise how bad their balance sheets were (and that they were insolvent if they got forced to sell their bad assets at that time). Later those assets recovered and I agree that at this time they should be forced to mark them to actual value. Some of them would look insolvent, but now we have the tools to deal with that.

  38. DeDude says:

    @Clawback;

    Don’t read a biased idiot like Dean Baker. Within a few sentences he writes:

    “earned the banks their $700 billion TARP blank check bailout”

    Talk about starting with a biased fact free conclusion. Look at the facts about TARP in the CNN link I gave above. The word “earned” imply an income not a loan. The “blank check” concept indicates that this income was without strings (total BS, as you mentioned there was a lot of strings, which made the banks eager to pay back TARP). The “700 billion” figure is totally misleading as TARP never distributed even close to that figure (currently 356 billion invested plus 118 billion paid back loans). “The banks” ended up being only a part of the TARP program as lots of non-bank entities ended up as major recipients of TARP funding (insurance, auto and residential RE). So in that one sentence you would be hard pressed to find a single word that is not part of a lie or gross distortion. This guy would make a Fox journalist blush in shame (and earn a huge bonus).

  39. clawback says:

    De Dude,

    I take Baker’s comment about the 700B to be about the fact that they had the influence to _secure_ that much cash for bailouts — it’s about the political realities, not the amount used. But your point is well taken. He’s right, though, about the CP market and the fact that the Fed either had no plan to keep the system of payments going, or they had other designs. I really don’t know what the motives were.

    One more thing about inter-bank lending is that this was the card the pro-TARP guys played — “banks are not lending to each other”, the “interbank credit market is frozen”, etc.

    My point, which is something the FRBNY and MIT economists sought to make, was that the interbank market, while under stress, was working and continued to work both before and after TARP was passed.

    You write that “A panic stopped before it takes off, is very difficult to document.” To that, I would say just read that over again a couple of times. Then tell me what panic? We’re awfully deep into the metaphysical here. Forget the epistemological difficulties for a moment — what, in God’s name, is the ontological status of “a panic that never took off”? (Is your name Donald Rumsfeld? ;-) )

  40. Yaun says:

    Interesting also this presentation by the central bank of norway:
    http://www.bsi.si/library/includes/datoteka.asp?DatotekaId=939

    Lessons learned, resolution
    • Focus on saving the system, not the individual bank
    • Owners first in line to take losses
    • Board and senior management of failed banks to be changed
    • Blanket creditor guarantees not necessary

    The exact opposite of what the treasury/FED have done (are doing).

  41. MikeW says:

    Here in the United States of Moral Hazard, the federal gov’t used the financial collapse as an excuse to further stuff the already-overstuffed pockets of a small class of politically well-connected financial types at astronomical public expense, and has (mostly) ignored the tens of millions of unemployed commoners.

    How likely is it that we can avoid a repeat, given that the people who caused the the collapse were in many cases richly rewarded for having done so? Are they not clever enough to have learned the perverse lesson that the bailouts provided?

    What a shame to have a recent counter-example available in Sweden, but to have ignored it.

    It’s not that the people running things here are too stupid to figure these things out, it’s that they are too corrupt.

    People have argued for decades about whether Sweden provides a good model for other counties, but it looks at least as though their democracy functions more effectively than ours. In the US it’s strictly pay-to-play and democracy has become an elaborate sham.

  42. Robespierre says:

    It is interested to note that people like De Dude are so fine about saving the system. The horrors that would have fallen on the world if these people were not saved or so he says. I guess that saving the Cali cartel would have been OK by him because without it the Colombian economy was in danger of collapse. You know Mr. Dude there comes a time when you need to put criminals where they belong – in jail or at least in bankruptcy.

  43. louis says:

    “Prudence, indeed, will dictate that governments long established, should not be changed for light and transient causes; and, accordingly, all experience [has] shown that mankind are more disposed to suffer while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed. But, when a long train of abuses and usurpations, pursuing invariably the same object, evinces a design to reduce [the people] under absolute despotism, it is their right, it is their duty, to throw off such government, and to provide new guards for their future security.” –Thomas Jefferson: Declaration of Independence

  44. obsvr-1 says:

    sometimes you need a little humor to explain the corruption … underlying message, organized corruption, sad but true.

    A Daily Bail Original Film: Hank The Hammer
    http://dailybail.com/home/a-daily-bail-original-film-hank-the-hammer.html

  45. Sechel says:

    To me the answer was and is simple. The equity holders get wiped out an the debt holders convert to an equity stake. All we did was substitute tax payer money for bond holder money. Who were we protecting…Sovereign debt funds? This is not how capitalism is supposed to work.

  46. DeDude says:

    Clawback; at the time every CEO was demanding a report on “how screwed are we if our counterparties fail” from their CFO’s, and rumors of the results (both true and false) were flying around. That was the panic building and you just needed one of the big boys failing to get the whole thing exploding into “stop all lending until we are sure” mode. Can that panic building up be documented by some number – off course not. Nor will anybody ever stand up and admit their soiled underwear now that things are better. Yes interbank lending was used as the official argument, because nobody could officially say they had talked to this, this and this guy and they all admitting they are insolvent and they have all soiled their pants because they are convinced that someone will call their bluff in the next few days. TARP created the confusion and relief that allowed time to develop other and better approaches to deal with the problems. Unfortunately, some of these temporary solutions were the last things done about the problems. I will be the first to admit that TARP was a hasty and poor solution to a problem that nobody in charge had predicted, although everybody should have. Hank and Ben were constantly behind the ball and hoping/praying for the best, when they should have been preparing for the worst (both were totally outgunned and out of their league). However, at that time and in that situation it was either TARP or chaos, so I am glad lawmakers chose the minor expense of TARP compared to the huge cost of chaos.

  47. DeDude says:

    Robespierre; I have not talked for the idea of saving “these people”. In contrast my argument has always been to save the institutions and the economy but throw out the rascals at the top. I think the banking system should have been saved the same way the automobile industry was saved. New management. total loss for share holders and haircut to bond holders. But with Hank in charge that choice was not on the table – so it was TARP or chaos, and between those two imperfect solutions I am glad we ended up with TARP. The sad part is that none of what these people did was criminal although it almost caused an economic collapse. So unless you want a system where the definitions of what is legal can be changed retroactively, then there is no way to put these people in jail.

  48. Robespierre says:

    DeDude Says:

    “The sad part is that none of what these people did was criminal ”

    And how do you know this? As far as I can tell there were no investigations (FBI, AG etc) of any of the players.

  49. philipat says:

    Meatballs or Sushi? Expect deflation.

  50. Expat says:

    The issues are monetary and civil (or moral, if you prefer). It appears to be true that the US response was far more costly than the Swedish response, but it would be argued by the banksters that the international financial system doesn’t give a rat’s ass about Sweden. Knock down six or seven of the top Wall Street banks, though, and you get panic, riots, fire, brimstone, cats and dogs getting it on, etc.

    Of course, armageddon was not a required outcome. The world would be a better, not worse, place if GS and Citi were sucked into a black hole. But, we saved these scum by handing them several trillion dollars of taxpayer money. And we know where it ended up…lines of coke, Russian hookers, Maserati’s and overpriced art.

    The moral side is where America really blew it. We have firmly and cheerfully endorsed the new brand of pirate capitalism. Where Rockefellers and Duponts built lasting industries (while acting like vicious, greedy autocrats with no respect for law or humanity), Wall Street has built numbers, mere ledgers full of sound and fury, signifying nothing. And then they drove us all over the cliff for the sake of another year’s record bonus. Thankfully for them, the high pile of fat, former consumers cushioned their fall, even bouncing most of them right back to the edge of the cliff.

    We could probably draw up a list of five thousand Americans who are chiefly responsible for this catastrophe, starting at the top (Clinton, Bush, Obama and their various henchmen), working our way through Wall Street’s elite, and rounding up the tally with major regional players as well as a few token low-level mortgage lenders and RE agents. If we were willing to blow the shit out of some worthless, third-world hellhole like Afghanistan because they knocked down two out-of-date buildings and killed a trifling number of our citizens (yeah, yeah, so sue me for saying “trifling” but put those figures into perspective with how many McDonalds, Budweiser, Marlboro, the CIA, and the US military kill every year at home and abroad), why aren’t we willing to at least investigate those reponsible.

    I am not suggesting they broke any laws. Much as no one has proven in a court of law that Osama and Afghanistan were responsible for 9-11 (oh, yeah, the Constitution and the Bill of Rights…oh, yeah, I think I remember that. But, no, I am not pretending that Osama didn’t do it.), why would we need to prove anything for the crisis. Why not invoke the Patriot Acts and simply make Blankfein, Summers, Bush, Cheney, Fuld, Mozilo, etc. disappear? Send them to Gitmo. Send them to a CIA torture pit in Egypt. Due process? Fuck them, like they fucked us.

    Ah, but not likely. And not one investigation, arrest, conviction, penalty, or fine except for a fat neo-Ponzi who spent the last ten years wondering why, oh why, no one was arresting him yet.

  51. mathman says:

    While we keep whistling past the graveyard:

    http://www.theoildrum.com/node/6958

  52. [...] “We Should Have Gone Swedish . . .” Barry Ritholtz (hat tip reader Swedish Lex) [...]

  53. number2son says:

    Heja Sverige!

  54. ZedLoch says:

    nationalization: actively opposed by the right, not even brought up by the left.

    go america. spend spend spend! then cut taxes. works every time, amirite?

  55. DeDude says:

    @Robespierre;

    I know it is an old yellow paper that many people just think we should wipe our a$$es in, hey the former president did. But so far innocent until proven guilty is still the law of the land. I have not even seen anybody pull out specific laws that could be used against the main activities that drove this disaster. Yes at the fringes a few crocks could be prosecuted, but what exactly would you charge the leadership of AIG and Citi with that could stick in a court of law?

  56. ” . . . the profits flowed to taxpayers, and the government was able to recoup more money later by selling its shares in the companies as well.”

    So lots of money flowed from the private sector to the public sector. Isn’t this identical with a monster tax increase? The Swedish tax system comes as close to being confiscatory as any you could imagine. I’ll bet the people who are cheering this post are the same ones demanding smaller government.

    Rodger Malcolm Mitchell

  57. DeDude says:

    No Roger – read the whole thing. The final cost to “we the Swedish people” were somewhere between 0 and 2 % of their GDP. So in that country the majority of the cost to clean up the mess after the irresponsible Swedish bankster had almost blown up their countries economy, was born by the irresponsible Swedish banking industry. If you make the mess, then you cover the cost of cleaning it up -how can that be wrong. And yes you do need big gobinment to come and force them to clean it up, because otherwise they will just run away. Big fat rich people, and corporations, always run after profits and away from responsibility – that is why you need to keep them under strict control.

  58. MinnItMan says:

    The Tea Party, near as I can tell, has no clear stance on bank bailouts. The Ron Paul option may be popular, but would never be followed. No way. I have no idea whether any future bailout would take the “no more Lehmans” approach, but Republicans will always bail them out, ultimately in the most repellent way possible.

    Whatever you want to call the Republican coalition (conservatives, libertarians, business-arians, green-eye shaders. etc) and their vaguely pseudo-libertarianism, my experience is that the similar psychological inclinations amongst this group are a better guide for where their real sympathies lie, and it’s almost fool-proof.

    Cops vs accused – cops*
    Business vs consumers – business*
    Business vs government – business*
    Government vs any instinctive undesirable – government*
    Creditors vs debtors* – creditors
    Government vs “druggies”* – government
    White vs. minority – white*
    Authority vs minority- authority*

    On a more abstract level, this usually means:

    repellent over-the-top crackdown/crony-ism vs. allowing “freedom’ to work”

    Asterisks represent first level of analysis, and a second, third, etc. level may be needed to determine the ultimate outcome> Take, for example, State v Limbaugh, where you need a fourth level before Rush comes out on top. Governement vs rich people, except for Leona Helmsley, it’s always the rich, and thus Rush keeps his place with very little contradiction (given his unswerving support of the War on Drugs, War on Crime and cops-are-always right schtick).

    I never voted for Democrats before Pres. Obama, and frankly, even though I still like him, he hasn’t blown me away. Other Democrats, may get my vote, but I don’t know yet. Republicans got a big hill to climb before they get my vote back and it requires a lot of measures that go against the inclinations I’ve cited.

  59. JET55118 says:

    Isn’t this similar to what Buffet did with Goldman Sachs and GE? WHY THE HELL CAN’T THE GOVERNMENT DO THE SAME THING?!

  60. badhumorman says:

    I’m glad the headline wasn’t “We Should Have Gone Swedish, Instead We Are Going Greek.” That may be true, sooner rather than later.

  61. spigzone says:

    It’s very simple.

    Cheney spelled it out in 1999 with his peak oil by 2005 prediction.

    It’s a knowing, calculated, smash and grab of as much US wealth as possible by those ‘in the know’ before the (shortly arriving) advent of DECLINING Oil Production irrevocably and permanently collapses the existing fiat/debt based financial system, which will be replaced with a physical reality based system next to impossible to game to any comparable magnitude.

    The consequent fate of the american economy and it’s people doesn’t figure in the equation.

    This is the true criminality of Obama, who is utterly betraying the people of this country by neither informing them (making ‘official’) this fact while making sure the smash and grab operation can continue to the very last possible moment by fighting behind the scenes to make sure REAL financial reform didn’t occur.

    Same goes for his ‘health care reform’.

    The utter immoral weasel criminality of the republicans is a given.