There is no question the US economy is messy, ugly, absolutely stinky. Lot’s of finger pointing and a lot of people looking for a solution. A solution is one thing I don’t have and can only imagine what it may feel like to be Timothy Geitner with everyone expecting you to have the answers. The closest I come is people asking what happened during Japan’s “Lost Decade” when the goverment stepped in and took a stake in most of the major financial institutions. Not being an economist, this is beyond my scope, however, I have come across two very good summary/analsis of the Japanese goverment’s foray into investing in the financial sector.
The first is from Center on Japanese Economy and Business is the summary report for the symposium,”Lessons from the Japanese Bubble for the U.S.” which was held on November 19, 2008 cjeb-111908-report_lessons-from-the-japanese-bubble-for-the-us.pdf.
The other is an article by Ed Lincoln, the director of the Center for Japan-U.S. Business and Economic Studies and professor of economics at NYU Stern School of Business. What Japan Got Right.
Both come out, not surprisingly, consistent. The Japanese goverment waited much too long, but once it did take action, this did seem to avert what was increasinly looking like a major league meltdown. The one thing I have not been able to figure out is whether in fact the Japanese goverment ended out coming ahead on the deal or not. Yes, 2 of the 21 banks that got money did go under, but the rest were either merged or continue on their own.
Another very thorough analysis is from Pimco Responding to Financial Crises: Lessons to Learn from
Which takes me to the moral of the story. As Nick Kristof said this week in his Op-Ed piece Escaping the Bust Bowl if you are going to spend taxpayer’s money, they should at least be given a comparable chance to invest and take part in the upside.