..in almost every case of recent banking crises in which emergency action was needed to save the financial system, the most economical (to taxpayers) method was to have the Government, as in Sweden or Finland in the early 1990’s, nationalize the troubled banks, take over their management and assets, and inject public capital to recapitalize the banks to allow them to continue doing business, lending to normal clients. In the Swedish case, the Government held the assets, mostly real estate, for several years until the economy again improved at which point they could sell them onto the market and the banks could gradially buy the state ownership shares back into private hands. In the Swedish case the end cost to taxpayers was estimated to have been almost nil.
...the largest bailout in US or world financial history, the failed TARP—Troubled Asset Relief Program—a proposed $700 billion financial stabilization scheme which, in original version would have allowed Treasury Secretary Paulson or his Treasury successor to use $700 billion, with no oversight or accountability, to buy bad or worthless assets from financial institutions he deems worthy of help. Paulson’s plan, the one essentially rejected on September 29 by the House of Representatives, would have done nothing to recapitalize the troubled banks. That recapitalization could cost an added hundreds of billions on top of the $700 billion toxic waste disposal.
Serious conservative bankers...who went through the Scandinavian crisis of the 1990’s are scratching their head trying to imagine how crass the Paulson TARP scheme was. That crass and politically obvious bailout of Wall Street by the taxpayers, what some refer to as ‘Bankers’ Socialism—socialize the costs of failure onto the public, and privatize the profits to the bankers—is a major factor behind the defeat of the TARP compromise version.