October 2008
The Sovietization of US finance… …and how to avoid it
The US government warned that failure to pass the Paulson plan into law would lead to disaster. In the worst-case outcome, that could mean wholesale nationalization of the finance industry. With Frannie and AIG, and a banking system that fails without dramatic Fed intervention, the Bush administration has already made a start. Peter Lee looks at alternative strategies that might prove sharper than Tarp.
IDEOLOGY MUST GIVE way to pragmatism. Around the world, the role of the state in financial and banking markets is set to grow and the private financial services industry will shrink. Let’s just get used to it. The programme of emergency bail-outs and nationalizations will roll on for some time.
There is a basic requirement for money to move from buyers to sellers, employers to employees, savers to borrowers. Where that system is fundamentally threatened, the state must always be ready to step in. In an absolute extreme, when no other credit is deemed trustworthy to lend to, it must not just support but effectively replace the financial system.
We are not there yet.
In the US, home of free market capitalism, the debate will be long and loud over the coming months as the government seeks to sustain the financial system with public money.
The Resolution Trust...
You must be a subscriber to access this archived content.
If your subscription includes access to the archive, please log in now to view.
To gain access to this content visit the subscription page or call our hotline on +44 (0)207 779 8999.
Subscribe online now and save up to 30% on your subscription.
If you are a trialist or subscriber, please enter your username and password at the top right-hand side of euromoney.com
Subscribers to Euromoney benefit from:
- 12 months access in print and online - on euromoney.com, read the latest issue early online, search for specific developments by region or sector, interrogate the results of Euromoney's benchmark polls, and view the archive dating back to 1996
- More than 30 specialist research guides free
- The results of Euromoney’s polls and surveys
- Tailored RSS news feeds direct to your desktop
- News delivered directly to your mobile device or PC
- Personalised email newsfeed of 'Top stories' and 'Breaking news'
Click here to subscribe