a practice run of a bailout has already been done--and it worked

[renate]

Of course, it wasn't a practice run for Sweden--it was the real thing. But it could be an instructive example for a larger-scale bailout here.

A banking system in crisis after the collapse of a housing bubble. An economy hemorrhaging jobs. A market-oriented government struggling to stem the panic. Sound familiar?

It does to 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.

(snip)

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.

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 government made the banks write down their losses before recapitalization, formed a new agency in charge of supervising institutions, and sold off the assets that the banks held as collateral. No blank checks.

http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html?em

[Fresh_Start]

1. nationalize the industry not just the debt

make those banking officials civil servants with civil servant payscales!!!

[MercutioATC]

2. If we do this, stock ownership MUST be part of the deal.

Forget about this being a gift or a loan. We should OWN fractions of these companies in proportion to the money they get from us...and we should pay street prices for the stock.