U.S. Financial Crisis: Lessons from Sweden (CRS Report for Congress)
| Release Date |
Sept. 29, 2008 |
| Report Number |
RS22962 |
| Report Type |
Report |
| Authors |
James K. Jackson, Foreign Affairs, Defense, and Trade Division |
| Source Agency |
Congressional Research Service |
Summary:
In the early 1990s, Sweden faced a banking and exchange rate crisis that led it torescue banks that had experienced large losses on their balance sheets and thatthreatened a collapse of the banking system. Some analysts and others argue thatSweden's experience could provide useful lessons for the execution and implementationof the Emergency Economic Stabilization Act of 20081. The banking crisis facing theUnited States is unique, so there are no exact parallels from which to draw templates.Sweden's experience, however, represents a case study in how a systemic banking crisiswas resolved in a developed country with democratic institutions. The Swedish centralbank separated out good assets, which it left to the banks to oversee from bad assets,which it placed in a separate agency with broad authority to work out debt problems orto liquidate assets. Four lessons that emerged form Sweden's experience are: 1) theprocess must be transparent; 2) the resolution agency must be politically and financiallyindependent; 3) market discipline must be maintained; and 4) there must be a plan tojump-start credit flows in the financial system. This report provides an overview of theSwedish banking crisis and an explanation of the measures Sweden used to restore itsbanking system to health.
