I would like to say one more thing about banking crises in general. Part of what's going on in Japan is not unique to Japan. In the recent past, it seems that banking crises are very difficult to resolve, for two reasons.
(1) The economic issues involved in a banking crisis are often subtle and complex. Politicians are often legal creatures with little economic training. Furthermore, the crises involved are often the result of macro-economic shocks, and bankers always sing the siren song that if the government will just wait, when the economic conditions change, the banks will return to health. This is exactly the song sung by Charles Keating over and over again to Jim Wright, then speaker of the house and the 5 senators on the Banking Committee. Of course, while the government does nothing, the situation can (and usually does) worsen, making the problem more difficult to clean up.
(2) While the bankers are singing this song, the politicians involved have a vested interest in believing them. That is because cleaning up a major banking mess almost always involves large expenditures of the publics' money, and guess where that money comes from: INCREASED TAXES. In any elected government, that is almost the surest way to get thrown out of office.
Thus, cleaning up a major banking mess involves lots of economic issues that politicians don't often understand, and the one political reality that they do understand involving political/career suicide. Therefore, sadly, they will often do nothing. During the S&L mess, exactly the same kinds of political bullshit went on for two or more years while the situation worsened. To the government's credit, it did finally draw a line in the sand and say this has got to stop. The 64 trillion dollar question is: can the Japanese government do the same?
jess |
