Posted by: Doug Henwood | March 18, 2009

Plenty of bullshit here!

The Financial Times has a piece today about the Swedish bank bailout. Here’s a nice quote. You couldn’t imagine a sharper contrast with the American approach:

Arne Berggren, the finance ministry official responsible for bank restructuring, is blunt about the approach he took. It was clear from the outset that the government would act as a commercial investor, demanding equity stakes in return for capital. “We were a no-bullshit investor – we were very brutal,” he says. The authorities also insisted on control. “You take command. If you put in equity, you have to get into the management of the business, [otherwise] management is focused on saving the skins of the [remaining private] shareholders.”

Not here. The Obama administration is clearly a pro-bullshit investor.  Dither about the AIG bonuses, then moan and posture, then give the company another $29.835 billion – offsetting the bonuses, sorta, in what looks like a rounding error – but still not exercising any serious government control despite owning 80% of the institution.

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Responses

  1. Funny since I was hoping to ask you about that piece by Krugman about unfavorably comparing European governments with their US counterpart re the economic meltdown.

  2. […] Via Doug Henwood. […]

  3. It seems like this part of a larger dynamic of managment screwing investors to some degree. Why were employment contracts written in such a way that guarenteed massive bonusses almost regardless of how business was going. If I was a shareholder (oh wait I am now) I would be outraged at this money grab by managment at my expense. Where were the shareholders in all of this? They should have been up in arms (pitchforks anyone?) about these employment contracts when they were first written. Who was minding the store; cetainly not managment? If shareholders had riegnd in management excesses and put forward a more stable long term approach (I know, “what a pipe dream”) then maybe this crisis wouldn’t be as bad and we wouldn’t be footing such a huge bill.

  4. The EU is worse on stimulus programs – the French and Germans are worrying about inflation, which is the last thing we need to worry about now. Three years from now, maybe. But worrying about it now is like channelling Andrew Mellon.

  5. Does the concept of “odious debt” come into play here? Seems to me like these obligations were impose without shareholder notice or consent.

  6. I think it’s hilarious that the French and Germans are worried about inflation when the OECD just put out a forecast that the Eurozone will contract 4.1% this year.

    The Chinese seem to be trying their best to turn things around, however.

  7. I don’t get the inflation Cassandra’s. We’ve just witnessed the destruction of huge piles of “wealth”, trillions of phantom dollars in the derivatives market.

    The government is vainly trying to replace that money with, admittedly, “funny money” of its own. But its only a fraction, not enough to keep everyone solvent.

    So handwringing about inflation, NOW, is really just a bullshit ideological bias. Bank-issued money equal wealth creation, government-issued money equals inlfation. Bah!

    The possibility of inflation, even hyperinflation, is possible down the road but only if the banks leverage all this goverment cash into more “money”. And once that happens were clearly out of the recession.

    When that begins to be a problem, curb the excesses with regulation and taxes. And pay down debt.

  8. Everyday now I have to read an economics “lesson” online, a subject I avoided at college after taking Econ 101. Disgusting, but necessary to learn how the plutocracy is manipulating us. In this regard I find DH superlative in clarity. DH had the best response in the recent Nation “debate”
    for instance.

    Now regarding Swedish banking program: I heard a former manager of this program say they just followed FDR! Heard it on “The World” broadcast from Boston public radio in Dec.? But no one seems to mention this.

    I also heard that the reason the US isn’t taking this approach is 1. we are talking HUGE banks here and 2. we don’t have the gov. staff to do it. Despite my wish to see banks as utilities or like credit unions, or even like the old neighborhood S&L I visited when in grammar school! – these sound like reasonable excuses for caution, but not for delaying nationalization.


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