"Swedish Finance Minister Slams Geithner Plan"
While the U.S. has funneled tens of billions of dollars to embattled banks such as Citigroup, Sweden temporarily took over two banks late last year and then sold them back to private investors at a roughly 50% profit three months later, says Swedish Finance Minister Anders Borg.
U.S. officials should confront the financial industry’s political power and seize temporary ownership of troubled banks, Borg says. Otherwise, error-prone bankers will be bailed out at taxpayer expense.
“We can’t let them get away with the fact that they’ve been reckless,” Borg told a group of economists while attending the recent International Monetary Fund and World Bank meetings here.
This isn’t a painless or cost-free solution, but it still looks to me to be the right one. I’ve come to appreciate over the past several months that there are legitimate issues of complexity, logistics, and legal authority that separate our situation from Sweden’s. But it seems to me that these are issues the administration should be working on, not just issues the administration should be raising as reasons not to act.
It’s worth noting that Borg is not one of those Swedish socialists you’ve heard about. He’s the finance minister in a center-right government and he’s been spearheading their charge for tax cuts and rollbacks in the welfare state. “This is not about the market economy,” he says. “We don’t believe in the state running the banking sector.” It’s just that he recognizes that there is no real “market” solution to a banking crisis, there are just different forms of government intervention available.