[lbo-talk] EU opens Northern Rock investigation

[Seth Ackerman]

Doug Henwood wrote:
> The best precedent we have, the Nordic banking crises of  
> the early 1990s, wiped out shareholders and displaced existing  
> managements but still required the expenditure of 2-5% of GDP. 
Well, the Bear Stearns deal seems to have wiped out shareholders 5 times 
less than it might have, apparently because of the way the Fed arranged 
things...I'm sure you're right about the ultimate need to spend public 
money in some fashion. But in the Nordic cases, these were governments 
with a long social democratic tradition; the disfavored classes were 
already getting something in return and it was already accepted dogma 
that the state has an obligation to protect people from the market. In 
the US, we have the opposite dogma, yet the rich get protected anyway. 
That could be a perfect political opportunity to hold a bailout hostage 
by using the ruling circles' hypocrisy against them. But if you concede 
from the outset that we're going to bail out the banks - without even 
making a fuss about whether the shareholders get completely wiped out - 
you lose whatever leverage you might have had.

Seth