Wednesday, March 19, 2014

Gary Shilling: US vs China bailouts similarities

A cautionary tale emerges from the recently released transcripts of Federal Reserve policy meetings at the height of the 2008 financial crisis. They show that, like China today, the Fed had all the money it needed to bail out any financial institution, yet central bankers admitted they were “behind the curve” and failed to move swiftly before runs on banks, notably Bear Stearns Cos. LLC and Lehman Brothers Holdings Inc. 

Could China be facing a similar situation -- plenty of bailout ammunition, ample willingness to use it, but tardy in its decision to step in? A financial crisis in the world’s second-largest economy would have global consequences.