Whatever view one takes of the desirability of public investment in financial institutions, it is difficult to see how this particular option can be avoided given the magnitude of the problems that have emerged, and the profound lack of confidence on the part of private investors which now exists.
Indeed, this process of public capital injections is already well under way in Korea, Thailand and Indonesia. Japan, it seems, is still struggling with the concept. Asia’s domestic private investors, for the most part, have taken such an enormous hit to net worth that it is difficult to imagine them being an early or substantial source of new capital for banks.