Waiting on the American Congress

Like a lot of folks, Macario Schettino sees the American bailout plan as Fobaproa redux. Fobaproa was the fund set up to save Mexican banks in the '94-'95 meltdown, and it subsequently turned into a major target for the populist left (especially Andrés Manuel López Obrador). I don't think the bailout will spawn a generation of Pejes Americanos, but Schettino offers some suggestions about how we can learn from Mexico's experience.

[About the bailout], I'll say exactly the same thing I said 13 years ago with our Fobaproa: it's not a bad idea, but it has a defect. The defect is that not only are the ones who committed the missteps not necessarily punished, but rather that it possibly transfers the cost of their poor moves to the bailout fund, keeping the earnings they obtained, which are without a doubt immoral, and possibly illicit.

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Thirteen years ago, when the topic was discussed in Mexico, my posture was that it was better to nationalize the banks, clean them up, and sell them off again. Because this would impede the frauds mentioned above. Those who were against the idea believed that nationalizing the banks would give off a negative image of the country that could put Nafta at risk. I don't think that was the case, nor do I think there would be such a problem in the United States. The AIG rescue used precisely this method: the government finances the bad portion of the debts, but keeps a high percentage of the business's stock. Strictly speaking, the government turns into the owner of the business...