Despite the strong interventions, recovery of the banking system seems a long way off. So how effective are the interventions? Rather than risking a judgement while the crisis is still unfolding, I would like to stress that the resolution of the crisis is being complicated by its unique, international and complex nature.
The crisis is unique in that it has presented new challenges to policymakers, such as the drying-up of securitisation markets, the simultaneous deterioration in banks’ ability to sell or fund assets, and the wave of involuntary re-intermediation of credits on banks balance sheets. The key challenge is that the unknown is by definition difficult to address and resolve.