Will the U.S. Bank Recapitalization Succeed? Eight Lessons from Japan

58 Pages Posted: 13 Aug 2009 Last revised: 26 Aug 2009

See all articles by Takeo Hoshi

Takeo Hoshi

University of California at San Diego; National Bureau of Economic Research (NBER)

Anil K. Kashyap

University of Chicago, Booth School of Business; National Bureau of Economic Research (NBER); Federal Reserve Bank of Chicago

Multiple version iconThere are 2 versions of this paper

Date Written: August 12, 2009

Abstract

During the financial crisis that started in 2007, the U.S. government has used a variety of tools to try to rehabilitate the U.S. banking industry. Many of those strategies were used also in Japan to combat its banking problems in the 1990s. There are also a surprising number of other similarities between the current U.S. crisis and the recent Japanese crisis. The Japanese policies were only partially successful in recapitalizing the banks until the economy finally started to recover in 2003. From these unsuccessful attempts, we derive eight lessons. In light of these eight lessons, we assess the policies the U.S. has pursued. The U.S. has ignored three of the lessons and it is too early to evaluate the U.S. policies with respect to four of the others. So far the U.S. has avoided Japan’s problem of having impaired banks prop up zombie firms.

Suggested Citation

Hoshi, Takeo and Kashyap, Anil K., Will the U.S. Bank Recapitalization Succeed? Eight Lessons from Japan (August 12, 2009). Chicago Booth Research Paper No. 09-28. Available at SSRN: https://ssrn.com/abstract=1448103 or http://dx.doi.org/10.2139/ssrn.1448103

Takeo Hoshi

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Anil K. Kashyap (Contact Author)

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