This is mostly interesting because of the source’s institutional affiliation:
“I think they know how big it is, but they don’t want to say how big it is. It’s so big they can’t acknowledge it,” said John H. Makin, an economist at the American Enterprise Institute, referring to administration officials. “The lesson from Japan in the 1990s was that they should have stepped up and nationalized the banks.”
Instead, the Japanese first tried many of the same remedies that the Bush administration tried and the Obama administration is trying — ultra-low interest rates, fiscal stimulus and ineffective cash infusions, among other things. The Japanese even tried to tap private capital to buy some of the bad assets from banks, as Mr. Geithner proposed.
Yes, that AEI. It’s worth noting, as well, that Makin specifically lists the Japanese economy as one of his areas of specialty. One prominent line of argument I’ve heard against a “Swedish” solution to the financial crisis is the observation that the Swedish financial system was much smaller than the U.S. one, in virtue of the small size of the overall Swedish economy. I think this has some force. What worked in Sweden may not work in the United States. Japan, however, is much more a big economy like the United States. And what we have from there is a cautionary tale which shows that whether or not nationalization can be made to work in a big economy, half-measures definitely can’t.