Ex-heads of Failed Japan Bank Acquitted

Reviewed by Takahiro MIYAO

Article:
Ex-heads of Failed Japan Bank Acquitted
Financial Times (7/21/2008)
http://www.ft.com/cms/s/0/
ccfde738-5676-11dd-8686-000077b07658.html

Comments:

There seem to be many lessons that the U.S. and other countries, which are now facing a financial crisis, can learn from Japan's bitter experience about its own crisis in the 1990s, the so-called the "lost decade." Acquittal of three former executives of the now defunct Long-Term Credit Bank of Japan (which later became Shinsei Bank) of all the charges related to the collapse of the bank 10 years ago is one of those lessons, which did not happen then, but just happened in Japan a couple of days ago (see the link above). The lesson in this case is: don't mix legal issues with moral issues.

In fact, the main reason why it took such a long time for Japanese policy makers to take appropriate actions such as using public funds to clean up bad loans and stabilize the financial system was public criticisms against the use of public funds to bail out failing banks and their executives who were accused of "illegal and immoral" actions to worsen the financial condition for their institution. The public demanded legal punishments for those who were supposed to be responsible for the financial crisis, rather than appropriate policies to deal with the crisis itself. This is the lesson that political leaders in the U.S. must learn in dealing with the current financial crisis, resulting from the subprime loan problem.

It should be noted that in Japan the supreme court has finally been able to make a fair decision on this kind of issue entirely based on legal factors without being pressured by the moral judgment by the public, after all these years. Hopefully, it does not have to take so long for the three branches of the government as well as the financial authorities in the U.S. to separate legal issues with moral issues in the current financial crisis.

Acknowledgment:
This review is adopted from the following blog (with its Japanese translation):
http://glocom.blog59.fc2.com/blog-date-20080721.html