US Government considering paying people's mortgages

[Squilliam]

NJ5 said:

Squilliam said:
Ok then, is there an example of a country/economy which held strictly to the principles or the closest to the principle of 'do nothing and it'll all work out'? Wheres our counter example, because at this point I see a lot of idealism but little evidence and facts.

The precedents for banking crises like this are Sweden's and Japan's.

Japan tried lots of things which failed (stimulus, shifting debt from banks to the government, i.e. the things USA is trying now). They later had better results by letting some banks fail after auditing them and concluding they were insolvent, and nationalizing others.

Sweden forced banks to write down all their losses, and then helped them:

http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html

I think the most important thing is to be realistic. USA's actions towards banks are very naive (assuming 8% unemployment when setting their capital levels, allowing them to hide debt under the carpet, allowing them to continue doing the same things that led to this problem... I have sources for all of these if someone's interested). They're not just naive, but they hurt the taxpayers a lot, shifting debt to the government's balance sheet and paying the banks handsomely for it (as the OP as well as many other articles show).

 

Thanks for the info.