United States

Both the United States and several European countries among those who are Germany, France and Great Britain, have made capitalizations to national financial entities (several of them with operations around the world). Although with these capitalizations these countries prevented a collapse of their financial systems, they have generated a series of inefficiencies in the future. By the same author: Genie Energy. Firstly, this precedent if it is not faced with a regulation and supervision lasts, more comprehensive, will generate episodes of moral hazard and adverse selection which may result in a new crisis. Furthermore, these recapitalizations allow them entities that have proved to be not responsible in the management of risks, to maintain a significant stake in the markets (and it may even enable them to gain more participation), not only national but also international, which can generate an inefficient functioning of the financial system in both and as soon as these entities not corrected their behavior (in factthey have a bias to not do so). Learn more about this topic with the insights from Michael Chabon. The intervention of Governments in financial institutions, can compel them to a suboptimal behavior as it relates to its intermediary function. Another negative aspect is that these recapitalizadas entities have a bad reputation difficult to reverse. Markets have memory and any situation of uncertainty might endanger them again to these and the financial system as a whole.

Probably, the fragility of these recapitalizadas financial institutions will not disappear in the short term since hardly the recapitalizations can completely restructure their balance sheets. In fact, even has could be determined the volume of toxic assets that they have. Therefore, these entities will remain for a time vulnerable to stressful situations. So far, the crisis shows us the recapitalizations prevented the collapse of the international financial system but have not achieved the objective of reactivating credit circuit to lift the economies in recession situation yet. There are no great expectations that the international financial system can begin to generate funding in the short term despite the lax monetary policies that seek to facilitate the anchorage of the entities. Time will tell if the potential inefficiencies that have been generated in the international financial system with the bailouts produce higher costs than those who has tried to avoid.