3 thoughts on “Dick K. Nanto”

1. shinichi Post author05/07/2015 at 7:45 am

   WikiLeaks Document Release
   http://wikileaks.org/wiki/CRS-RS22960
   February 2, 2009
   Congressional Research Service
   Report RS22960

   The U.S. Financial Crisis: Lessons from Japan

   by Dick K. Nanto

   Foreign Affairs, Defense, and Trade Division

   https://file.wikileaks.org/file/crs/RS22960.pdf

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2. shinichi Post author05/07/2015 at 7:53 am

   Lessons Learned

   The following are various lessons and observations that observers have gleaned from the Japanese experience.

   • Authorities underestimated the nature and seriousness of the banking problem at first. Most thought the financial problems would resolve themselves through economic growth and by keeping central bank interest rates low in order to increase bank margins and profitability.
   • There was a slow recognition of the extent of non-performing loans and the carrying of “zombie” firms that technically were bankrupt but were kept alive by banks. This delayed resolution of the problem.
   • Transparency and an updating of definitions and reporting requirements with respect to non-performing loans was important in realizing the true extent of the problems. Many of the rescues of ailing financial firms by a healthier financial institution required a government injection of capital in some form.
   • There appeared to be a lack of domestic or external constraints and of political leadership that would have urged authorities to take more decisive action earlier.
   • The government began by creating new institutions to handle emergency financial assistance but later transferred such activities to the Deposit Insurance Corporation of Japan (DICJ), an institution that already was working with troubled financial institutions. The DICJ also was given permanent authority to assist ailing financial institutions when so ordered by the Prime Minister.
   • The Japanese government injected capital into financial institutions in several ways depending on the situation. In most cases, the DICJ could use its discretion in determining the nature of the assistance.
   • Troubled assets were bought at a steep discount from their face value from sound financial institutions (to inject capital) and disposed of without unduly disturbing markets — usually within three years. The two banks that were nationalized were later sold to private investors. Capital injections also took the form of subscriptions to stock, grants, and subordinated loans.
   • Even with the $495 billion financial bailout packages, between 1998 and 2003, Japan’s banks wrote off some $318 billion in non-performing loans. The burden was shared.
   • Government holdings of corporate shares have generated dividend income and capital gains for the DICJ.
   • Since there are fewer banks in Japan, the authorities could focus recovery efforts on several large banks and fewer than 200 smaller financial institutions (there are about 8,500 banks in the United States) which facilitated information gathering and coordination.
   • When Japan announced an early financial bailout package, it placed stringent conditions on the assistance that banks were unwilling to accept. The net result was that the banks ignored the package and tried to bolster their balance sheets by not lending. This was seen as worsening the economic conditions for the country. Most of the assistance to failing institutions, however, carried conditions that were enforced by the DICJ.
   • New technologies, globalization, and the blurring of boundaries between types of financial products and institutions made risk management increasingly difficult for financial regulators.
   • The bursting of the real estate bubble in Japan caused more difficulty for banks than the bursting of the bubble in stocks because the decline in real estate values affected the value of collateral on much bank lending.
   • Japan is considered to have acted too slowly with respect to monetary policy, fiscal policy, and the resolution of problems in the banking sector. Once the economy began to recover, fiscal policy is thought to have tightened too soon.

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3. shinichi Post author05/07/2015 at 7:56 am

   預金保険機構 (Deposit Insurance Corporation of Japan (DICJ))

   http://www.dic.go.jp/

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