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A Different Approach to $7,000,000,000.00 "Bailout"

By Deirdre R. Wheatley-Liss, Esq.

Category: Elder Law, Estate Planning, Estate and Inheritance Tax, Business Law and Planning, Tax Law and Planning, Probate and Estate Administration, Financial Planning, Miscellaneous Musings

I can't seem to stop reading about this "bailout" or No Banker Left Behind Act. It is like watching a car wreck in slow motion - you would do something if you could, but you don't have the power to stop it.

Then, I came across the below that I think offers a better way to look at a bailout. Apparently, Sweden found itself in a strikingly similar bank credit crisis back in 1992: "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." Sound familiar?

How Sweden Solved Its Bank Crisis - NYTimes.com: "But Sweden took a different course than the one now being proposed by the United States Treasury. And Swedish officials say there are lessons from their own nightmare that Washington may be missing.

Sweden did not just bail out its financial institutions by having the government take over the bad debts. It extracted pounds of flesh from bank shareholders before writing checks. Banks had to write down losses and issue warrants to the government."

The article goes on to say that Sweden spent about the same percent of its GDP (4-5%) on is 1996 bailout of the banks, but took equity back so the out of pocket to the government (ie the taxpayers) was really only 2%.

I am thinking I am liking the Swedish plan much better than take all my money, do what you like, have no oversight, and no real change plan I see now - oh, and I really love that we have to do it NOW or life as we know it will end, when as we know it is already long past.

Full post as published by New Jersey Estate & Elder Planning Blog on September 24, 2008 (boomark / email).