International Law

U.S. to Employ Chinese-style Financial Regulatory Techniques

It wasn't too long ago when American officials excoriated PRC banking authorities for establishing asset management companies to take the nonperforming loans off of the books of technically insolvent banks and to recapitablize them. A ruse, it was shouted to the rooftops, to clean up the books of banks desperately in need of a listing on worldwide stock exchanges, but prevented by numerous "technical" deficiencies. These asset management companies have performed badly: perhaps 20% capital recovery.

With the announcement of a plan involving "sweeping reforms" to "take bad assets off the balance sheets of financial companies," we see basically those same American officials employing -- in essence -- a similar technique. One cannot believe that the cash recovery will be as poor, but who will take the hit? The American treasury. This suggests that the next American President will be forced to raise taxes.

John McCain has just announced his belief that treasury has gone too far in its rescue operations. I'll provide a link as soon as I get one.

Full post as published by Asia Business Intelligence on September 19, 2008 (boomark / email).