Digging Out From Debt Mountain: Lessons For U.S. Banks .. 2-28-08 7:48 AM EST
SAN FRANCISCO (Dow Jones) -- With profits at U.S. banks and thrifts at a 16- year low in the fourth quarter and U.S. consumer expectations at a 17-year low in February, financial headlines often read more like history lessons.
As American banks dig out from under their mountain of bad debt, analysts say policymakers would do well to remember Japan's string of mistakes as it grappled with its own bad-loan crisis, after the late 1980s bubble economy burst and left financial institutions burdened with massive levels of bad loans.
The bungled cleanup plunged Japan into its so-called "Lost Decade" of stop- and-go recession.
There are no quick fixes, say bankers. And counting on one could well make matters worse.
"Lessons of what not to do from it are far more plentiful than the what-to-do sort," said James Malcolm, now a London-based strategist at Deutsche Bank. He was a Tokyo-based economist with a different investment bank at the height of Japan's crisis in the late 1990s.
"Basically, it's inevitable that people want a quick and painless fix, but the reality is, it's going to be slow and painful so you've got to provide a supportive policy environment, and push forward with restructuring the markets."
Dragged their feet
It's critical that U.S. banks and government policymakers face up to facts, analysts say. Recent data make it hard not to.
