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The Swedes Pipe Up

It looks like Swedish finance minister Anders Borg isn't keen on the Geithner plan:

The Treasury Department's "public private investment program," unveiled last month, seeks to tempt private investors to buy toxic assets by protecting investors against heavy losses and giving them access to public funds. "Trying to create a phony market" will prove less effective than taking ownership stakes, Borg says. ....

Borg says trying the asset purchase plan first may only raise the cost of an eventual government takeover. "I'm not certain it will work," he says. "It might be the case you'll do the same as we."

This sort of critique sounds like cheap talk coming from most people. But, in addition to the much-hyped Swedish approach to the bank crisis of the early '90s, it sounds like the Swedes have had a recent success, too:

Sweden temporarily took over two banks late last year and then sold them back to private investors at a roughly 50% profit three months later.

This I did not know.

I still buy the complexity argument--well, not as an argument for never seizing/nationalizing, but as an argument for trying something else first. But, wow, if we could get the banks out the door and re-privatized even in 6 or 9 months, that option would suddenly look pretty attractive. (Maybe the size/complexity of a Citigroup or BofA would preclude that, maybe not...)

--Noam Scheiber