These developments would leave the debt-to-GDP ratio at its highest level since the early 1950s, the years following the massive debt buildup during World War II. Certainly, our economy and financial markets face extraordinary near-term challenges, and strong and timely actions to respond to those challenges are necessary and appropriate.
We can only achieve this if we stop giving government debt preferential regulatory treatment over other loans or securities. Government debt should be backed with a level of capital which adequately reflects its risks. At the same time caps should be imposed on bank sovereign debt holdings.