The country was so far in the hole in 1992 " after years of imprudent regulation, short-sighted economic policy and the end of its property boom " that its banking system was, for all practical purposes, insolvent.
But Sweden took a different course than the one now being proposed by the United States Treasury. And Swedish officials say there are lessons from their own nightmare that Washington may be missing.
Sweden did not just bail out its financial institutions by having the government take over the bad debts. It extracted pounds of flesh from bank shareholders before writing checks. Banks had to write down losses and issue warrants to the government.
That's the more prudent action - to let the banks and their shareholders pay the pike on the front end, and if that doesn't work, provide the cash - but slowly - to make money available to consumers.
Stumble It!
Tweet This
Bookmark on Delicious
Share on Facebook
Share on MySpace