Bailing Out the Banks, Swedish-style

The Swedes are good at three things: 1) meatballs 2) candy fish 3) bailouts

I came across this article about Sweden's economic problems in 1992 - very similar to our current situation, albeit on a much smaller scale - discussing their bailout and its success. I'm leaning heavily toward the necessity for government equity in any companies from which we buy distressed securities. There has to be some skin in the game on the part of these firms and their shareholders. This accomplishes a few things:

1) The shareholders have to first suffer the consequences of their assets' having plummeted in value by writing down the losses of so-called toxic securities, as should be the case in a capitalist economy

2) It keeps banks responsible, with the taxpayer as shareholder

3) The threat of the gov't gaining an equity stake might cause some firms to reject the bailout and seek recapitalization elsewhere, as was the case with SEB, Sweden's largest bank.

The good news is that Capitol Hill has apparently reached a consensus on a bailout plan that includes Uncle Sam channeling the Oracle of Omaha:

House Speaker Nancy Pelosi, D-Calif., said Mr. Bush's agreement with Democrats on limiting pay for executives of bailed out financial institutions and giving taxpayers an equity stake in the companies cleared a significant hurdle.

Who knows what the details are, but it sounds like they are leaning in the right direction. I'm becoming more and more optimistic toward this plan.