Financial Times, US belatedly learns lesson from Japan

US belatedly learns lesson from Japan

By Gillian Tett

Published: May 8 2009 18:47 | Last updated: May 8 2009 18:47

In recent months, Japan’s sorry banking history has provided the world with plenty of reasons to worry about America. Now, however, it might offer a crumb of comfort, too.

The reason? In part, it lies with those stress tests that Washington has just conducted on its largest 19 banks.

During most of the past two years, the American leadership has been in a state of procrastination and denial in relation to its banking woes: first it tried to pretend that the financial woes were not too serious, since they were “contained”. Then it insisted that free market pressures would be enough to force the banks to come clean about their mess – without the need for the government to act.

In reality, the Americans were not at all unusual in taking that stance: when Japan’s banks first became plagued with bad loans in the early 1990s, the government in Tokyo took an identical stance – and continued denying the scale of woes for almost a decade.

But precisely because the Japanese were such past masters of procrastination – and learnt the hard way what that can do – they have been quietly dubious about much of what Washington has said about the banking woes in the past two years.

As long ago as the autumn of 2007, for example, Daisuke Kotegawa, a canny former financial bureaucrat who was central to Japan’s own banking clean up, pointed out to me that what was missing from the American debate was any effort to conduct an audit of Western banks.
(read more at http://www.ft.com/cms/s/0/fc1c2760-3bf3-11de-acbc-00144feabdc0.html?nclick_check=1 )