From Spiegel comes this interview with Germany’s finance minister…
SPIEGEL: And is the United States completely to blame?
SteinbrÃƒÂ¼ck: The source and focus of the problems are clearly in the United States. There are many causes. After 9/11, a great deal of cheap money was tossed into the market. Apparently some of that money went to people with poor creditworthiness. This led to the growth of the real estate bubble. The banks embarked on a race over profit margins. Then speculation spun completely out of control…
SPIEGEL: …which also benefited German banks for a while.
SteinbrÃƒÂ¼ck: But they didn’t invent these transactions. The stokers on the financial markets were responsible for that.
SPIEGEL: And how is the US patient doing now?
SteinbrÃƒÂ¼ck: It’s in the ICU with pneumonia. This means that here in Europe, we can at least expect to get a bad cold. The US patient lacked legislation, a regulatory framework that could have helped avoid this development. That’s the key issue for me. The financial products became more and more complex, but the rules and safeguards didn’t change. I don’t know anyone in New York or London who would have asked for a stronger regulatory framework 18 months ago. They were always saying: The market regulates everything. What a historic mistake!
SPIEGEL: Your US counterpart, Treasury Secretary Henry Paulson, began by essentially nationalizing the two US mortgage giants, Fannie Mae and Freddie Mac. But then he allowed investment bank Lehman Brothers to plunge in bankruptcy before saving the insurance giant AIG with an $85 billion (Ã¢â€šÂ¬58 billion) bailout. This doesn’t exactly look like a clear course of action.
SteinbrÃƒÂ¼ck: In the case of Lehman, the US government wanted to send a signal to the market that they are not prepared to offer a bailout under any circumstances. In the case of AIG, we had direct talks at the G7 level and implored them to stabilize the situation. An AIG bankruptcy would have triggered shock waves around the world. We were all staring into the abyss at that point.
I have to laugh when I read stuff like this. It is like the people in the US blaming Saudi Arabia for all the evils in the world. Granted, Saudi Arabian money funds a lot of Islamic extremists, but it is the western (and in particular the US’s) addiction to oil that makes them rich.
If it was so obvious that stronger regulation was needed why didn’t German regulators stop German banks from buying the crap? Most of the biggest buyers of US crap were banks owned by the German government. Furthermore, any government that allows a mere 6 billion euros of equity to support a 400 billion euro balance sheet does not have alot of room to talk trash.
I doubt I will find this as funny when a billion plus Chinese decide that their economic problems are all America’s fault.