In the late 1980s, all anyone could talk about was how Japanese companies were going to take over the world. The Japanese were smarter than we were, more disciplined than we were, more team-oriented than we were, hungrier than we were. Japan was taking over. We were done.
Then Japan’s bubble burst.
And it was payback time.
In the late 1990s, all anyone in America could talk about was why Japan was mired in a “lost decade.” It was cultural, everyone explained. The Japanese were just too wimpy and “team-oriented” to face the facts. Instead of just facing reality and forcing banks to write off all the stupid loans they had made in the bubble years, Japan was just playing extend and pretend.
And then our bubbles burst.
And now it’s payback time again.
All anyone in Japan is presumably talking about now is how we should change our name to the United States of Hypocrisy.
Instead of forcing our banks to take responsibility for their stupid loans, write down losses, and move on, we’ve gone exactly the other way. We’ve changed the mark-to-market rules. We’ve given away hundreds of billions of dollars in bailout money. We’ve encouraged extend and pretend.
And now comes the latest in our long line of hard-arse economic-recovery policies, like bailout, denial, too big to fail, zombie banks, and extend and pretend:
Political pressure for regulators to go easy on poor little community banks that got snookered into making those stupid loans…
From Calculated Risk:
Tonight from the WSJ: Bank Crackdown Draws Criticism Politicians are putting pressure on regulators to go easy on small community banks across the U.S. …
“A self-fulfilling prophecy of community bank failures, shrinking credit availability and a slower economic recovery can all result from a regulatory overreaction to the current crisis,” said the letter, which also was signed by Rep. Walt Minnick (D., Idaho)…
This is backwards. By moving slowly, the FDIC is tainting all small banks and making it more difficult for them to raise capital (ht Pat). In addition, healthy banks are holding on to capital to try to buy assets from the FDIC at a discount, compared to the cost of a similar new loan.
The sooner the FDIC completes the process of closing failed banks, the better for the remaining banks and the economy.
Time to wake up, America.