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Friday, April 03, 2009

Is America repeating Japanese history?

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Free Exchange looks at whether we are repeating the mistakes the Japanese made in dealing with their financial crisis, and finds worrying similarities:

Is America repeating Japanese history?, Free Exchange, The Economist: Early in his tenure, Tim Geithner, the treasury secretary, promised that American policymakers would not make the same mistakes Japan did in tackling its financial crisis. But as politics threaten to upend his efforts, Mr Geithner should take a second to consider why Japan made its mistakes.

Japanese officials took too long to commit substantial public money to recapitalising their banks. But it was not because they were ignorant of the dangers or Andrew Mellon acolytes hell-bent on liquidating speculators. Like Mr Geithner, they feared being shot down by voters and politicians furious that taxpayers might bail out overpaid bankers.

One Japanese official told me that when he sees Treasury officials testifying before congress with protesters waving anti-banker placards behind them, it reminds him of pictures in Tokyo newspapers in the 1990s. At the time, he and his colleagues knew that saving the financial system would require a lot of public money, but also felt it would be politically impossible to propose it until all other avenues had been tried.

This sentiment is eerily similar to what prevailed inside the Treasury in mid-2008. ... [...continue reading...]

    Posted by on Friday, April 3, 2009 at 04:23 PM in Economics, Financial System, Policy | Permalink  TrackBack (0)  Comments (28)

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