Friday, February 13, 2009

The Japanese Banking Crisis

What's that old saying? Those who are provided with an obvious historical parallel that's completely relevant to what's happening today, are doomed to ignore it? Ignore the successful navigation of the exact same problem you have at your peril? No fat chicks? When someone provides you with a list of failed plans and one successful plan, it's rude if you don't follow the list 1-100 until you get to the good plan at 101? Our government is run by apes in suits? It's something like that.
The Obama administration is committing huge sums of money to rescuing banks, but the veterans of Japan’s banking crisis have three words for the Americans: more money, faster.

The Japanese have been here before. They endured a “lost decade” of economic stagnation in the 1990s as their banks labored under crippling debt, and successive governments wasted trillions of yen on half-measures.

Only in 2003 did the government finally take the actions that helped lead to a recovery: forcing major banks to submit to merciless audits and declare bad debts; spending two trillion yen to effectively nationalize a major bank, wiping out its shareholders; and allowing weaker banks to fail.
More alarming? Some students of the Japanese debacle say they see a similar train wreck heading for the United States.

“I thought America had studied Japan’s failures,” said Hirofumi Gomi, a top official at Japan’s Financial Services Agency during the crisis. “Why is it making the same mistakes?”
Sorry Hiro, no wire-fu or hello Kitty was involved, so we didn't pay attention. So here's our historical parallel, it looks like we're going to fuck around for a decade before we do what smart people said we should have done in the first place: do what Japan ended up doing and what Sweden decided to do. Audit, nationalize, eat the weak.

But why would we want to do that? It worked. We have to try everything else first.

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