Tuesday, September 23, 2008

Dodd Is Learning From Sweden

Read what Sweden did with it's banks when they had a similar crisis in 1992.

Important here: a political consensus emerged around the idea of the government taking an equity stake in return for buying bad assets. The consensus was important so that investors trusted that the proposal had wide public support.

The key idea here is that what Sweden did is quite similar to what Dodd is proposing.

How did it work in Sweden? Quite well. The banking system rebounded in a year.

What would be the cost if we DON'T pass this bill? Well, if the banking system collapses, let's start with FDIC insurance on deposits. Would that be 30 trillion? What about the lack of GDP from the recession? What about everyone's home values and IRAs being worth $0? For a start....

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