In my view, the impact will certainly be positive. The fact that the costs of any bank rescue will fall less on sovereigns should lift expectations of government debt sustainability, thus improving asset quality for banks exposed to their governments. And the fact that bail-ins will precede bail-outs means banks’ funding costs should be better decoupled from the fiscal condition of their sovereigns.
All that being said, with the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate. BIS Review 126/2008  3  Should the Congress choose to undertake fiscal action, certain design principles may be helpful.