By Simon Johnson
In the wake of recent equity market declines, the clamor for bailouts of various kinds grows ever louder around the world. Influential voices call for “leadership” from the United States and Western Europe, and for policy makers in those countries to “get ahead of the curve.” This is all code for a simple and familiar plea: Do something that will protect investors, particularly creditors who have lent a lot of money to banks and countries that now appear to be in serious difficulty.
But providing another round of unconditional creditor bailouts in this situation would be a mistake. What we need is a combination of transparent losses where bad loans were made, combined with a ring-fencing approach that protects sound governments and companies. There is no sign yet that policy makers are willing to make that distinction clear.
Keep reading here: Another Round of Bailouts? – NYTimes.com.
