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NY Times: "Suddenly, Europe Looks Pretty Smart"

Europe has set the pace for the United States, opines the New York Times (HT: David):

After initially dithering, Europe's leaders came up with a financial bailout plan that has now set the pace for Washington, not the other way around, as had been customary for decades. That was clear when the Treasury Department decided to depart from its own initial bailout plan - the one approved by Congress earlier this month - and invest up to $250 billion directly in the nation's banks. The nuts and bolts of that approach had been laid out days earlier by European leaders as they tried to save their own financial system. And that outcome left Gordon Brown, the British prime minister, and Nicolas Sarkozy, the French president, in something of a commanding position to claim the title of wise men. They are now speaking of creating a Bretton Woods agreement for the 21st century.

Let's hope this will lead to less derogatory remarks about European "socialism" and welfare waste. Perhaps "European socialism" will even get a positive meaning, i.e. McCain's comparison of Obama to European socialists will not help him win votes.

Well, Europe has not got the financial crisis under control. There will probably be plenty of bad news and more government interventions ahead of us. I wonder who will call the shots in the new Bretton Woods style agreement, if there will be one. What role will China and the various Middle Eastern sovereign wealth funds play?

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Marie Claude on :

I heard that there will be not a single money as "etalon", but several, dollars, euros, roubles, taels... also that each state is still responsable for its own maneuvers in solving the crisis

Don S on :

From the NY Times piece: "“There’s no doubt that it was a British plan that was copied by the U.S.,” said Leon Brittan" Well, in point of actual fact it was a Swedish plan implemented to fix a mid-90's banking crisis in that country which had it's serial numbers filed off by the Brits, who now claim credit for the idea. Not that it's at all a bad idea of course, which is why Paulson moved with such alacrity to adopt it. The initial British plan was rather too punitive to the banks to optimize the actual goal of raising the maximum amount of bank capital, however. Brown's first plan included two provisions which would have badly hurt raising private capital for the banks. The government investment carried a punitive 12% interest rate on preferred shares, and prohibited the banks from paying any dividend to private shareholders while the preferred shares were still in place. The Paulson bank capitalisation plan was superior to the British version, with an interest rate of 5% and warrants convertable to common shares after 5 years I believe, so the US government could share in the prosperity of the recovered banks. The rest of the piece seems to rest upon some extremly lean arguments, such as the fact that European markets rebounded more sharply last week than USD markets did. This is true of course, but failed to mention the fact that the European markets had previously fallen considerably lower than US markets for the year - so a sharper rebound is perfectly natural. Mentioning this would have weakened the premise of the article so nturally it was not mentioned; SOP for the NY Times far too frequently these days I fear.

Joe Noory on :

Days before Brown announced the depositing scheme, they were talking about the exact same thing on CNBC, a business news channel, as being likely and probable. Besides, if they're so smart, how is it that the amounts by which these banks had to be bailed out in Europe were so large that the governments are becoming majority stakeholders?

David on :

Let's face it: Bush is Gordon Brown's poodle. Seriously, I think Germany's traditional risk aversion means that the recession will not be as serious for most people. The average German does not own stocks, does not own real estate, and has very little credit card debt. He/she does not have to worry that retirement savings are wiped out when the stock market crashes: pensions are state-funded. And, unlike Americans, Germans have health care coverage even when they lose their jobs.

mo jung on :

when you listen to the msm in the us and europe all will be wonderful under a president obama. so don't worry you all drank the KOOL_AID!

Marie Claude on :

mo joung Anyway, the "palindrone" or "the alice au fond des merveilles (in the bottom of the marvels) in the surburbs", who's geting into the office as POTUS, in all senses you'll get into your a..., and we don't care who'll make that, cause we are the "black duck" in the pond

joe on :

Just want to make sure I have this correct. The package Germany has voted to implement is about the same amount as the US has. Is that correct? I want even go into about percentages of GDP etc. But it does cause one to wonder if this is an American problem then why a package at all? Could it be the German banks were taking just as much risk as their counterparts in the US when it came to subprime mortgages and other risky loans. I am sure someone can enlighten me on all of this. Thanks

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