Letter to the Editor of BusinessWeek on Financial Crisis

• Miscellaneous
• 13th October 2008
• YC

Dear Editor,
Your report based on the video interview published in Business Week on October 13, 2008 entitled "Muhammad Yunus on the Financial Crisis" misrepresented my views on what I believe is needed to tackle the current global financial crisis.

The interview quotes me as stating that I am opposed to the present government bailout to save the failed financial institutions, and I am proposing that we should rely on market solution. It is ridiculous to suggest a market solution at a moment when the market virtually does not exist. I welcome the bailout. I believe that at this time there is no other alternative to a government bailout.

When I talked about market solution for such crises, I was talking about the future. I was suggesting that this is the right time to prepare to avoid FUTURE crises.
I was arguing that bailout cannot be relied on as solution to market problems. Market must have built-in mechanism to protect itself from the occurrences of such
crises. Self-protection is possible only when market can ensure that it will not allow a crisis to develop in the first place.

I suggested a mechanism to buy all potential toxic assets on a daily basis through a business created by the participation of all businesses, which engage in highly speculative businesses and make high profits. I suggested that the market must be equipped with a strong mechanism to detect bubbles at the very initial stage and an instantaneous reaction device to shoot it down.

Everyday the market must hunt down the potential toxic assets and bought off by a company created for these purposes. Capitalization of this company may be made from requiring companies to pay a percentage of gains made from highly speculative transactions at a progressive rate. Market must be developed as a self-correcting system. It cannot be left as a wild party of some money-hungry people, and organizations.

I hope you will publish my letter so that your readers do not misunderstand me.

Regards
Muhammad Yunus
Managing Director, Grameen Bank