A banking system in crisis after the collapse of a housing bubble. An economy hemorrhaging jobs. A market-oriented government struggling to stem the panic. Sound familiar?
It does to Sweden, which was so far in the hole in 1992 - after years of imprudent regulation, shortsighted macroeconomic policy and the end of its property boom - that its banking system was, for all practical purposes, insolvent.
But unlike the United States, whose Treasury has made a proposal to deal with a similar situation, Sweden did not just bail out its financial institutions by having the government take over the bad debts. It also clawed its way back by pugnaciously extracting equity from bank shareholders before the state started writing checks.
That strategy kept banks on the hook while returning profits to taxpayers from the sale of distressed assets by granting warrants that turned the government into an owner. Even the chairman of Sweden's largest bank got a stern answer to the question of whether the state would really nationalize his bank: Yes, we will.
"If I go into a bank," Bo Lundgren, Sweden's finance minister at the time, said, "I'd rather get equity so that there is some upside for the taxpayer."
more:
http://www.iht.com/articles/2008/09/22/business/krona.php?pass=true