On 30 June 2008 I called the recession well over three months before Gordon Brown first admitted it.
On 15 October I pointed out the benefits of 'ringfencing distressed banking assets' aka creating a bad bank. Three months later politicians on both sides of the Atlantic appear to be considering this measure at long last.
If this had been done on a timely basis (a little before when I suggested it), it would be an excellent way of wiping the slate clean, restoring confidence in the banking sector and allowing the private sector to take us forward. That time has passed.
So what next? On 10 December, I made the point (see comment three on this thread) that we were on "a slippery slope to state ownership of banks". This will represent another government mistake. How right I am about this will be clear by mid-March.
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3 comments:
We don't need taxpayer funded government controlled 'bad banks', we need new 'good banks' and leave all the crap and the losses behind in the old ones.
What we need is a banking system that works. The government will make a dog's breakfast of the bad bank solution and it is too late, but as one of a range of measures to restore confidence in the banking industry it is theoretically a good idea - and has been quite well operated in practice - see Czech Republic.
Who would pay for the crap and losses left behind in the old banks?
I agree with Mark that the big banks cannot be allowed to pass off their bad debts and continue as normal.
A change in culture towards smaller banks with more open (and accurate) accounting policies could make for a less turbulent future in the financial system.
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