Daily Archives: December 2, 2009

By Theo Vermaelen and Christian Wolff

In the recent financial crisis, taxpayers in many countries had to pick up the bills that resulted from governments bailing out banks. The idea that the government will save you if you make mistakes encourages excessive risk-taking. Bailouts have created popular resentment against bankers’ compensation, which makes it difficult to pay competitive salaries after a bank is rescued. So bailouts, which also add to the government deficits and crowd out other government spending plans, have many undesirable characteristics. Read more

From the FT:
Competitive devaluations threaten a trade war – Michael Pettis
Tactical taxation – Editorial comment
The real cost to business of government guarantees – John Kay

From elsewhere:
Double dip warning – NY Times, Paul Krugman
Feudal Lords Of Finance – Simon Johnson
The morals of bailouts - Felix Salmon
Going Beyond the Rules - iMFdirect