Lessons from Sweden

The Swedes had a similar financial sector melt down in the early '90's. Their solution was for the government to take equity positions in the banks, meaning that when the banks recovered, tax payers got some of the up-side.

Sweden did not just bail out its financial institutions by having the government take over the bad debts. It extracted pounds of flesh from bank shareholders before writing checks. Banks had to write down losses and issue warrants to the government.

That strategy held banks responsible and turned the government into an owner. When distressed assets were sold, the profits flowed to taxpayers, and the government was able to recoup more money later by selling its shares in the companies as well.