So Much For A Swedish Model

Part 1

The Cowboy has been ruminatin’ on the U.S. bailout of the financial institutions that was leaked last weekend, and formally announced on Monday.  The markets were clearly pleased.

What to say?

Is the Cowboy a no-show?The Cowboy was in Stockholm a little over a year ago, and he saw plenty of nice models.  He spoke with his former quasi-roommate, a dancer with the Royal Swedish Ballet (part of the Operan and the third-oldest ballet company in the world), and reminisced about a mutual friend, a Roman-Swedish restaurateur-cum-actor and Robert DeNiro look-alike.  Said friend was a scion of the family behind Cafe Opera (housed under the Operan), a long-time favorite for Swedish models.  Additionally, the Cowboy has been known to study Swedish models from time to time.  So, it is with some authority that the Cowboy writes about this topic.

The Cowboy has argued for the brief nationalization of troubled, too-big-to-fail financial institutions as a solution to the problem of price.  This echoes the strategy used in Sweden in 1990-91 during the banking crisis there.  The story turned out well, and taxpayers made money on the deal.  Thus, the Swedish model.

The Cowboy has an inherent bias towards market solutions and the private sector.  Ironically, in the run up to the announcement of  the Obama-Geithner plan, it seemed to be the Republicans who were advocating nationalization while the Democrats favored a solution that had a stronger private sector component.

The end-product is Geithner’s plan, a public-private partnership that uses the public purse as a source of funding and leverage in order to funnel private investment dollars into “bad bank” pools.  As for the matter of price, an auction system will be used to settle on a price for assets that are sold into the pools.

It’s highly structured and quite clever.  Some years back the Cowboy got a sparkle in his eye at the thought of structured solutions to problems, particularly when those structures incorporated market forces to solve public policy problems.  I still like those kinds of solutions.  Still, I felt that in the current environment, where confidence and trust needed to be re-established quickly, an Enron solution might not work as well as an SBC solution.  I’ll explain in a subsequent post.

Suffice it to say that the Cowboy’s hopes for a Swedish model have been dashed yet again.

(to be continued)

Published in: on March 28, 2009 at 10:32  Comments (1)  

One Comment

  1. Car ‘models’, fashion ‘models’, banking ‘models, OH MY!!! Looking forward to part II.

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