成功欧洲TARP的关键点

We told you so”. That captures the reaction of many American bankers and policymakers towards Europe these days. Ever since America unveiled its own troubled asset relief program in 2008, observers in Washington and New York have muttered darkly about Europe’s failure to grasp its banking nettle.

More specifically, it has long been suspected that Europe’s banks were shying away from revealing their bad loans; it has also been clear that some banks would need more capital, particularly if they had to write down deteriorating sovereign debt. Thus the obvious solution to some is what might be called euro Tarp – or a euro zone version of the capital injections and stress tests that in effect halted the American banking crisis back in late 2008 and 2009.

This may yet occur. This week euro zone leaders signaled that they are – belatedly –moving that way. But before investors get too excited, it is worth taking a hard look at what America did back in 2008 and 2009 that made Tarp “work”. For, to my mind, there are at least six key points – five bad, and one good – which Europe needs to consider.

● Firstly, size matters. When Hank Paulson, then Treasury secretary, unveiled Tarp back in 2008, he told colleagues he was looking for a “bazooka” to stun the markets and turn sentiment around. At the time, $700 billion seemed big enough to work, since this number – crucially – outpaced market expectations. And while those expectations subsequently got inflated – and analysts started calling for, say, $1,000 billion – these doubts did not set in until later; and, crucially, after sentiment had turned.

● Secondly, co-ordination is crucial. One reason why Mr Paulson’s bazooka “stunned” the markets was that it was wielded by a single team – policy was being set by a close-knit group of Treasury and Fed officials. This mattered because in late 2008, investors had no stomach for delay or conflicting policy signals.

● Thirdly, excessive democracy does not always help. In the first stage of Tarp, politicians were involved; Congress, after all, initially vetoed Mr Paulson’s plan before approving it after a market crash. But later a tight team of bureaucrats took control and were able to fire the Tarp bazooka with speed, in a straight(ish) line. Remember how Mr Paulson yanked the bank chief executives into the Treasury on a Sunday afternoon and ordered them to accept capital injections – and sign? That could never have occurred if Congress had been involved.

● Fourth, plans need to be flexible. When Mr Paulson initially created Tarp, his team thought that the $700 billion would be used to buy bad assets from banks. However, they later decided to recapitalize the banks instead. Future financial historians will argue endlessly about whether this was the “right” decision but if nothing else, this showed that the Treasury had great freedom to act.

● Fifth, stress tests only work if they address the visible points of stress that the public and markets care about. The US stress tests of early 2009 were far from perfect; some experts thought, for example, that reserves for commercial real estate were too small, and there were no reserves for impairment of sovereign debt. But while that worried geeks, the stress tests did address the issue that was really bothering markets: namely whether there were enough reserves for residential mortgages. And that, coupled with their comprehensive nature, made them seem “credible” enough to turn sentiment.

Can Europe now repeat this trick? It will certainly be hard. After all, political sensitivities make it tough for European regulators to focus on the visible piece of the stress tests that markets really care about and understand – namely eurozone sovereign bonds. And Europe’s government system cannot act with speed or co-ordination, particularly when politicians are involved. There is nobody obvious in Europe like Mr Paulson who can demand a bazooka and fire it with speed; except possibly Jean-Claude Trichet (and he is on his way out).

But if Europe can overcome that handicap, there is a sixth key point to remember. Back in 2008, it was widely assumed – at least among the US public – that most of the $700 billion used in Tarp was permanently “spent”. But these days, Treasury officials reckon that less than $50 billion has really been lost. For once Tarp was deployed, and sentiment stabilised, then asset values rose, along with bank earnings, enabling much of that money to be repaid. And this happy result is not unique to the US; governments in Scandinavia and Japan also recouped funds, when they did their own Tarps in earlier crises.

The good news, then, is that if a euro Tarp does emerge, that money might not be “lost” in the long term; or not if the earlier lessons about speed, co-ordination and flexibility are learnt. The bad news is that this remains a big “if”. No wonder the markets are worried.