Obama moving towards "Swedish Model" for banks.

[dkf]

Barack Obama, the president, who has tried to avoid panicking lawmakers and markets by entertaining the idea, has recently moved more towards what he calls the “Swedish model” – an approach backed strongly by Mr Graham.

In the early 1990s, Sweden nationalised its banking sector then auctioned banks, having cleaned up their balance sheets. “In limited circumstances the Swedish model makes sense for the US,” said Mr Graham.

Mr Obama made it clear last week that he favoured this model over the piecemeal approach taken in Japan, which many would argue is the direction US public policy appears to be heading.

“They sort of papered things over,” Mr Obama said. “They never really bit the bullet . . . and so you never got credit flowing the way it should have, and the bad assets in their system just corroded the economy for a long period of time.”

Senior administration officials acknowledge that the financial rescue plan unveiled by Tim Geithner, Treasury secretary, last week could result in the temporary nationalisation of some weak banks.

The plan sets out a framework for revealing the extent of the likely credit losses facing banks. Most private sector analysts believe the exercise will reveal that some banks have large capital shortfalls.

Policymakers acknowledge that, if this is so, it will be difficult for those with the largest shortfalls to raise the required equity from the markets; in which case the government would probably have to take temporary control. Moreover, while nationalisation remains taboo in some political circles it is increasingly openly discussed among economic policymakers of all leanings.

http://www.ft.com/cms/s/0/2ad3b750-fd27-11dd-a103-000077b07658.html?nclick_check=1

[ej510]

1. This needs to be done. I hope he moves forward on this.

[Kurt_and_Hunter]

2. Good. That's hopeful news.

[AtomicKitten]

3. The Swedish model is more applicable to US banks than the Japanese model. n/t

[jberryhill]

28. That can be a tough call:

Swedish Model:



Japanese Model:

[AtomicKitten]

31. snort

:toast:

[girl gone mad]

4. Best news I've heard all day.

Now bring on the claw backs.

[flpoljunkie]

5. Differences Between Japan and the United States

Differences Between Japan and the United States

The NYT seeks to find lessons for the United States in Japan's efforts to recover from the collapse of its stock and housing bubbles in 1990. It argues that Japan's economy did not finally recover until it cleaned up the books of its major banks, which led several to be nationalized or go out of business.

http://www.nytimes.com/2009/02/13/business/economy/13yen.html?ref=business

While there are undoubtedly many lessons for the United States from the Japanese experience, it is important to note that banks play a much less central role in providing capital in the U.S. economy. For example, most mortgages are financed through securitized mortgage pools. The same is true of car loans and other types of consumer debt. Large corporations typically obtain short-term capital by selling commercial paper on the market.

The Fed and Treasury have taken steps to ensure that this route of obtaining capital is open, which means that the problems of the banks will have less consequence for the U.S. economy than was the case for Japan. While it would still be desirable to repair the banking system as quickly as possible, the need is not as urgent as this article implies.

--Dean Baker

http://prospect.org/csnc/blogs/beat_the_press_archive?month=02&year=2009&base_name=differences_between_japan_and#112922

[dkf]

6. Its true that securitization was a big part of our capital structure.

and it makes you wonder how we can provide all or even a significant portion of that capital without using all that leverage.

That is why, I think, banks that said they were OK without TARP took the funds anyway, so they could grow their lending beyond where they had been prior to the meltdown.

I bet the rest of the world will balk at buying our assets beyond treasuries now. Fool me once and all of that.

It could be that we will need to rely more on our banks than we did before, until some trust is regained.

[underpants]

7. Great idea! this will definitely create a rise in business!

[ellie]

14. Indeed.

[Blue_Tires]

26. I heartily welcome our new Swedish overlords...

I will be their most humble and obedient servant...

[rug]

8. Can't wait.

[Avalux]

9. That's really good to hear. Sweden's model worked.

They only had 10 banks so it was much easier to nationalize; Obama will have to get creative with over a thousand banks.

[liberalmuse]

10. I sort of dissed my Prez this morning...

about the stupid Rove shit. I thought I had read the article, but obviously filtered out the most important parts. Hell, I'm cranky these days (my boss suggested today that I get tested for mono, since 3 of my co-workers have had it, and I have the symptoms). Not that that excuses anything. I know better to jump on my Prez like that. Anyway, I have faith that he is doing the absolute best that is humanely possible. Hell, better.

I'd like to apologize for the being the first to post a stinky comment on that thread this morning. Someone called me and others out on it and they were right to do so.

[camera obscura]

11. Alex Lundqvist for Treasury Secretary! Oh wait, wrong kind of Swedish model...

[nradisic]

12. Swedish model is the best choice by far...

There are a few banks like Citi and B of A that will need to be nationalized, but the sooner they do this, the sooner we can move on and the markets will respond in kind slowly...

[dkf]

15. I wonder if BofA would have been okay without Merrill?

That would suck.

[depakid]

13. Not necessary call it Swedish- America has its own model with the RTC

in the late 1980's and early 90's.

That's how the Savings & Loan crisis was cleaned up- and that's essentially the pattern that needs to be followed with the larger insolvent banks.

[dflprincess]

16. May he also move to the Swedish model of healthcare

and other social services.

[crimsonblue]

19. No, don't go with Swedish healthcare.

Go with Dutch healthcare. It's the best in Europe.

[Laelth]

17. Good. My sig. line is as appropriate as ever.

Intelligence, sanity, flexibility, and purpose. What more could you as for?

The United States is a LIBERAL Country.

:dem:

-Laelth

[crimsonblue]

18. This is something I advocated in October...

(only to be screamed at by some here on DU and DailyKos). Looks like I was right. But it's okay, I'm not going to gloat or anything.

[Occam Bandage]

20. This thread does not have nearly enough pictures of Swedish models.

[NJGeek]

21. Swedish model? NIIIIIICCCEEE

http://images.google.com/images?q=swedish+model

[ItNerd4life]

35. LOL. That was my initial thought.

[defendandprotect]

22. No more bail outs for capitalism . . . NATIONALIZE banks and finance and hold onto them--!!!

No auctions, no re-privatizing them!!

[eridani]

23. Wonderful news! PLEASE follow through, Mr. President! n/t

[mmonk]

24. If so, I hope it isn't done over the weekend as a surprise and people

get the chance to put their investment money into something else before they lose the rest of it.

[harun]

25. Looks like even the Repukes want this to happen

We should be nationalizing for-profit Health Insurers and then shutting them down.

[jberryhill]

27. Already started at my bank....

I was in there the other day, and the new teller looked a lot like Liv Ullman - Tall, blond, great teeth.

Someone upthread mentioned the Japanese model. That's not really so bad either, but I don't like it when they dye their hair strange colors. They have such naturally deep black hair that enhancing it with artificial colors can be something of a distraction - especially when it comes out that sort of orangey-red color. I don't know what they are shooting for there.

But the Swedish model. Heck yeah. Put a sauna in the vault and you really got something going there.

[Pachamama]

29. How about Obama move our Country towards the Swedish Model? Seriously.

Lets include in that plan, not just the banks, but healthcare, education, and TAXES!

Sweden isn't perfect, but I will say this as someone who spent a lot of time there and in Denmark where half my family is - The people overall enjoy a far higher standard of living, live longer and are far happier. (yeah, I know that its dark in the winter and people can drink a lot and the suicide rate goes up, but as anyone who has been there or the Scandinavian countries, you don't see the kind of suffering that we have here).

I guarantee during these dark times economically (all over the world), the Swedes will fair far better than anyone....

[debbierlus]

30. Do it, Obama. Do what is best for the nation!

[biopowertoday]

32. Chuck Schumer said NO last week on the same show. I had read

of the Swedish model a few weeks and I agreed with Grahm--it needs to be on the table.

[ClarkUSA]

33. Obama recently raised a caveat re: "Swedish model" so I would take this OP with a grain of salt

At a recent press conference, Barack said it's easy to nationalize when a country has three or four big banks like Sweden did,
but the U.S. has thousands, big and small, so it'd be comparing apples and oranges to ask whether he'd follow in Sweden's
footsteps (in response to a reporter's question re: following the "Swedish model").

[BluegrassDem]

34. Can we also get the Swedish model of vacation time...4 weeks off paid!!!

Our sick/vacation/time off time sucks in this country. In Sweden, new fathers can take weeks off from work for to be at home with their child. Not to mention, they get more than a month of vacation by law. It's a wonder we're so burned out in this country!! There's lots of things we need to emulate Sweden, not just the banks.

[Rosa Luxemburg]

36. I thought he might

sounds good to me