What's Holding Up Asian Bank Reform?

It took the U.S. $150 billion and half a decade to work out its savings and loan banking crisis in the mid-1980s. Asia is entering Year Two of its own crisis and only just starting to move about $1 trillion in bad loans off the books of its banks. The longer it takes, the worse the recession will be. Japan has squandered seven years of economic growth because it has refused to deal with its banking problems. The rest of Asia has already lost one year to procrastination. Laws have been passed. Local U.S.-style Resolution Trust Corp. organizations have been set up. But few bad loans have actually been sold off, and even fewer banks have been closed. As a result, many poorly managed but well-connected companies are being kept afloat, while healthier businesses are starved for credit. Until Asia's banking system is reformed, the economy will continue to suffer.

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