FT.com | John Gapper’s Business Blog | America was right to look and learn

America was right to look and learn

October 15, 2008

My column in the FT this week is about the way that banking bail-outs by government became correlated, and the US ended up looking suspiciously multilateral in adopting recapitalisation of banks:

History will record that George W. Bush, the US president, faced two big crises during his term of office: the terrorist attacks of September 11 2001 and the financial meltdown of 2008.

Mr Bush’s response to the first was to tell the rest of the world that “you are either with us or against us” and invade Iraq with the UK in tow. His response to the second was to listen to finance ministers from around the world and fall in line with Europe by buying stakes in banks.

I vote for the second approach.

It is much too early to declare “mission accomplished” on the financial crisis since markets remain extremely nervous and banks are still reluctant to lend to one another. But the latest version of the global bail-out plan at least stands a fair chance of success.

Personally, I have more faith in this plan than I did in the Iraq war, partly because the first draft was discussed with others who wanted to achieve the same end. That helped the US to sharpen up its ideas. Designing things by global committee has flaws but launching a unilateral offensive that lacks credibility is worse.

You can read the rest of the column here and comment below.

October 15th, 2008 in Finance | Permalink

8 Responses to “America was right to look and learn”

Comments

I really don’t know if I agree with the bail out or not, monies are still bailing out banks who don’t need the monies (Wells Fargo) for example their surplus surpasses any other financial entity surplus and yet Wells Fargo still got money. I think Bush and the rest of his groupies feel asleep at the wheel. With respect to us occupying Iraq that’s another topic. Very interesting reading, but I do agree with you to certain point. I’ll be visiting your site more often, thank you for the Opportunity.
Posted by: Michael D. Mosely | October 15th, 2008 at 10:16 pm | Report this comment
If Bush and co. had gotten their act together six weeks ago the meltdown would not have spread to the rest of the world.
Posted by: James Anderson | October 16th, 2008 at 8:41 am | Report this comment
As James Anderson says, a package like the eventual one introduced six weeks ealier would have saved a lot of pain. And clearly, drafts of the eventual package had been sitting on british Ministerial and select Washington and Brussels desks for more than six weeks.
Posted by: David Heigham | October 16th, 2008 at 8:16 pm | Report this comment
Frankly, I think it’s pretty lame journalism to link the two events. Is it simply not possible to write good essays without including a cheap shot at Bush? Is there just not enough information to be both original and professional (neither of which the blog post was).

I am not just being trite for effect when I say that I am just so disappointed in today’s paid journalists. Is it any wonder more and more people seek their news from the so-called pajama media? It’s never as consistently biased as the mainstream media and it’s often far more original and interesting, as well as being more accurate. Certainly that’s true about this piece.
Posted by: SangerM | October 16th, 2008 at 10:15 pm | Report this comment
I have deleted a couple of comments that threatened to degenerate into an angry debate about the Iraq war. It was my fault, since I was the person who brought it up originally. But the substance of the column was about the response to the financial crisis so I think we should stick to that.
Posted by: John Gapper | October 16th, 2008 at 11:24 pm | Report this comment
“Mr Paulson, who did after all insert a clause in the bail-out plan allowing himself to switch course”

I think you are giving Mr. Paulson undue credit John. The congress insisted on the clause, Paulson never liked it.

I do not trust the man to have American taxpayers interest at heart. I think he needs to be clearly told that his client is the American people not Goldman Sach.
Posted by: Christian G. | October 17th, 2008 at 2:50 am | Report this comment
Mosely, it’s necessary to provide money to banks that don’t need it. If they don’t, then it will be easier for the masses to identify the banks that are doing poorly… therevy causing a run on these banks. The result would be the bailout essentially hastening the demise of the banks that were intended to be saved.
Posted by: Bill J | October 17th, 2008 at 7:40 am | Report this comment
Mr. Gapper is absolutely right to draw a connection between the current financial meltdown and the 9/11 attacks, even though his connection is different from the one I suggest here:

One of Osama bin Laden’s goals in attacking the World Trade Center was said to be that of causing a financial crisis in America. If that was the case, the Bush/Cheney administration and their big business allies have done a much better job of it, with their regressive taxation and laissez-faire deregulation policies that have concentrated wealth and power in the hands of the military-corporate elite, to the detriment of both our financial system and the real economy.
Posted by: algasema | October 19th, 2008 at 7:48 pm | Report this comment