EU governments have woken up to the need to defend the banking system by guaranteeing all or some of their citizens’ bank deposits. After Germany, Ireland and Greece, Denmark is the latest to do so. And Denmark may also be the one country that needs to do so the most of the remaining [...]

Along with American and British banks, Irish banks have been under heavy attack due to the turmoil in the financial services sector. The government has finally had enough and stepped in with a blanket guarantee for six institutions of both deposits and bank debts.
This is a move that is identical to what the Swedes [...]

The House of Representatives in the United States has defeated the proposal originally crafted by U.S. Treasury Secretary to help bail the U.S. out of financial difficulties. My hope is that Congress can get to business and craft a comprehensive solution, which this legislation was not.
Meanwhile markets have imploded on the news and further [...]

I have said before that a systemic response is necessary to deal with the present banking crisis in the United States. This crisis has nothing to do with subprime assets and little to do with things like predatory lending. Those are issues that populists will use to prosecute the scapegoats we are likely to see down the line. The crisis has everything to do with low interest rates, zero regulation and a credit bubble of monumental proportions.

The banking system of the United States is effectively insolvent. Buying up $700 billion in assets is not going to solve this basic fact. A systemic response is needed. If we do not address these issues, we may see significant dead-weight loss as many institutions fail.

The NY Times has a story on how yesterday’s bailout deal failed. This is an insider’s tale with blow by blow detail. It is a fascinating view into how the U.S. conducts government policy. Below is a snippet from the post and a link to the full story.
One interesting facet in the matter was the [...]

While you have your eye firmly peeled on the financial mess splayed in front of you, other industries are busy setting themselves up to profit from close business ties to the Bush Administration before a new Sherriff comes to town.
The defense industry is first on that list.Bloomberg reports that the Bush Administration had been looking [...]

I have taken my time to let the basics of the Paulson Plan seep in before I rushed to judgment. But, the time to judge has come and the plan comes up short on all counts. His plan is geared more toward Wall Street and protecting the financial services than toward main street [...]

Update 06 Mar 2009: I am re-posting this because I am considering the view that Fannie and Freddie will be used to buy up mortgages, effectively nationalizing the U.S. Mortgage problem (see my last paragraphs). I had seen this as the likely result when the GSE were first put into conservatorship, but the Bush Administration was opposed to such an outcome. This is ever more likely now that Obama is in office.

Yesterday I pointed out that today’s global banking crisis has some historical precedents worthy of comparison. In particular, I looked at the Japanese bailout schemes from their housing bubble to see if there was anything there to learn. Unfortunately, the Japanese experience leaves doubts as to whether government intervention is helpful or harmful.

There are other examples, however. The Nordic model is a particularly useful one to look at as we move forward. Sweden’s Central Bank Chairman Bäckström shared some of his insights from that experience some eleven years ago in a speech to a Federal Reserve symposium that is available on the Swedish Riksbank website. This is a brilliant piece of work.

Update: Also see my list of Bankrupt global financial institutions.
Recently, the pace of writedowns by major money center banks has increased. UBS announced today it wrote down $19 billion. Deutsche Bank announced today it wrote down $4 billion. Lehman Brothers was forced to raise over $4 billion in equity capital. Merrill [...]