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.
Sweden did not just bail out its financial institutions by having the government take over the bad debts. 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.
The final cost to Sweden ended up being less than two per cent of its GDP. Some officials say they believe it was closer to zero, depending on how certain rates of return are calculated.
The New Straits Times Online......
But Sweden took a different course than the one now being proposed by the United States Treasury.
Sweden did not just bail out its financial institutions by having the government take over the bad debts. 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.
The final cost to Sweden ended up being less than two per cent of its GDP. Some officials say they believe it was closer to zero, depending on how certain rates of return are calculated.
The New Straits Times Online......
