Friday, January 23, 2009

Sweden's Fix

There is a great story in today's NY Times on how Sweden dealt with their banking mess.

Here is an excerpt:

Sweden placed its banks with troubled assets into a so-called bad bank, where they could be held and then sold over time when market and economic conditions improved. In the meantime, it used taxpayer money to provide enough capital to allow banks to resume normal lending.

In the process, Sweden wiped out existing shareholders.


To be sure, the United States has a much larger economy than Sweden’s, with a vast and international banking system. The toxic assets Sweden took from its banks improved when the economy improved, but Sweden wasnot confronted with a global recession.

Still, many analysts believe that Stockholm has lessons for Washington.

In effect, the Swedish state took on all the assets that were worthless or impossible to value at the time, and then managed them or sold them with the aim of getting as good a deal as possible for the taxpayer.

“We hired real estate people,” said Lars H. Thunell, the former chief executive of Securum, the institution that became Sweden’s repository of all the underwater assets. “We hired industrial M.& A. people. We needed to manage real assets.”

I've come out against nationalization, but that doesn't mean I don't find the above reading very interesting.