Bailout, Tune Out

Posted on Jan 30, 2012

Elliott Brown (CC-BY)

The BBC reports that while the United States and the U.K. have made a habit of buying too-big-to-fail banks and then looking the other way, the safest banks in the world aren’t just owned but operated by civil governments.

In the U.K., “[t]he government has decided that pretending it does not own the bank is the best way to get their ... money back.” In the U.S., Washington even let the same executives who drove their institutions into the ground remain in charge.

Other governments in Europe and China not only meddle in their banks’ affairs, they manage them “with specific roles that are deemed to have value beyond gaining profits.” 

For example:

According to [Global Finance] magazine, for the third year in a row, the safest bank is Germany’s KfW.

The state-backed development lender founded in 1948 - even before the founding of the Federal Republic of Germany - is 80%-owned by the federal government and the states own the rest.

It has a five-member board that reports to a 37-member supervisory board - which is formally chaired by the federal economy minister.

The government therefore takes a direct role in running the bank. The bank funds itself through bonds back by the government, which is the richest economy in Europe.

KfW backs export-oriented firms and small businesses, lending at low rates, and deals with the privatisation of German state-owned enterprises.

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                                                  —PZS

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