Mr. President, We need a Bad Swiss Bank.
A comment on the world’s financial crisis.
The world financial crisis is far from over. Leading economists estimate that globally we will lose 3.6 trillion USD. So far, we only found 1.65 trillion USD. Most of the toxic financial products will only expire in 2011 or 2012, so we still have to adapt ourselves on more bad news.
Globalization has always proclaimed that the role of governments and the state should be reduced, and that multinationals will take the lead. We see now that we are in a new phase of globalization, where the state retakes its leading role.
In order to save the financial industry, a state can either nationalize its banking industry or found a bad bank. The idea of a bad bank means that the state buys all the bad or toxic assets of the banks in the country, and returns cash or government bonds. This would boost the confidence among banks, since they will not have any longer bad assets. Trust will increase among these players and the financial system will continue to work again. So far, bailout plans proved only to save the banking industry where the stronger banks buy weak ones. But the world citizen or entrepreneur did not benefit from that.
No matter what happens, either nationalization or bad bank option, the tax payer will have to accept that they will pay for the mistakes made in the financial industry. But the bad bank is a better option, since it will reduce faster the confidence among the key players. The government bonds can then be given to the Swiss National Bank, so they private banks can get cash for it and improve their solvability.
Although Switzerland ‘s financial industry is of key importance to the country, the only bad thing is that we alone cannot solve the world’s financial problem. A creation of a European Bad Bank will not only help the Swiss but also the rest of the European Union citizens. Dear Mr President, we look forward to hearing from you as good citizens of this world.