Booze, Baseball, and another "B"

Tuesday, September 23, 2008

Maybe Sweden does know what's up....

Usually when I hear people talking about how "Sweden did this..." or "Sweden did that, so we should be able to too..." I just roll my eyes and stop listening to that person. Liberals over the last decade or so have become so enamored with the IDEA of what other countries have accomplished (specifically Sweden, but there are some other places too), that they often times now engage in deitizing those governments.

Today though, things are different. In terms of the Wall Street bail out, I do think that we should look to what Sweden did as a model for our response.

In the early 90s, Sweden had a banking crisis, in some ways similar to our own. To solve it, the government stepped in, and bailed out some banks. But unlike the program being proposed to the Senate Banking Committee today, the Swedes did it right. They made the banks write down their losses and issue warrants (equity in the company) to the government in exchange for bailouts.

To think that taxpayer money should be used to bailout a company, but in the end there is no (tangible) benefit to the taxpayers, is stupid. If we are going to use taxpayer money to bail companies out, then we should get an ownership stake in the company. If the banks don't like it, they don't have to participate, and they'll either figure out a way to fix themselves or they'll dissolve. For the companies which are partially owned by the government, after the markets get better and the companies improve, the shares are sold, to the benefit of the taxpayer.

I don't know exactly what to think about the idea of having some sort of bail out options for borrowers. To think that people who entered loans, that they knew that they could not afford, are exempt from blame is short-sighted and stupid. If you're not making enough money to cover the payment on a debt service, then you have to be smart enough to not get into that debt.

I completely agree with the idea of curbing executive salaries. These people made poor decisions, which have had effects touching all of the world, and to think that they should be entitled to some sort of "golden parachute" severance package, that's just dumb. You screwed things up, you're going to be held accountable. They should be glad that they aren't getting locked up and doing time with the Enron guys.

Read more here. I tried finding some in depth info today on the Swedish collapse and bailout, but I wasn't successful. If you are aware of any articles, please feel free to mention them.

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