Saturday, 17 January 2009

Financial Regime Change: the Dominos Keep Falling

Comrade Mason’s back blogging I see, and back on crackin’ form. He’s pushing the line that the crisis is now unfolding to the point where banks which were supposedly a (private) part of the ‘solution’ last autumn are now manifestly part of the problem. Just go look at Barclays. So, says Comrade Paul, there are four alternative potential solutions :

a) In short order, a credit guarantee scheme for businesses to allow them to roll over their loans

b) A taxpayer funded cap on bank losses, so the banks can draw a line under the old crisis and start meeting the new (hopefully not with new excuses about why they cannot afford to lend)

c) If they can get away with it, and if the banks will stomach it, a TARP-style fund to buy up bad debts and put them into a "toxic" bank, owned by you and me.

d) And if this doesn't work, nationalisation. I mean real nationalisation.”

Peston focuses on government plans for plan b – he calls it ‘the mother-of-all bank insurance schemes’ - but Mason gives the impression of not thinking it will work. Peston is very sniffy about the prospects of a 'bad bank' being set up, but Mason takes the longer - and possibly the cooler-headed - view.

The old system of Anglo-American finance is dying and yet no-one seems to have a clear view of what to replace it with. The crisis is not over - the fat lady hasn't even got into the car to drive to the opera house let alone come on stage and began to sing....

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