The real lesson of the Asian meltdown: too bad nobody's listening.

• Author: Cottle, Michelle
• Position: Dangers of liberalizing US banking laws

Truth be told, most Americans dislike their bank. Long lines, surly tellers, obscene ATM fees, and a wait of anywhere from three days to 30 years for a check to clear have combined to make banks a source of minor irritation for most consumers. The banking system, however, is another matter entirely. Unlike the stock and bond markets, with their risk and drama and potential for big returns, the banking industry is decidedly less glamorous. Stories in the press, usually buried on page 12 of the business section, positively ooze with steamy talk of prime rates, loan portfolios, and capital requirements. Hardly the stuff of which Hollywood blockbusters are made. As such, most of us never think about the business of banking at all. Until something goes wrong. At that point, all hell breaks loose and everybody wants some answers.

Such is the case with the recent meltdown in Asia. Prior to last summer, few Americans could have told you what continent Thailand is on, much less what the country's financial system looks like. But starting in early July, when the value of the Thai currency, the baht, fell through the floor -- triggering financial shock waves that soon brought down the Philippines, Indonesia, Malaysia, and South Korea -- U.S. newspapers from Boston to Phoenix were awash in articles detailing the economic downfall of the Asian tigers.

Rehashing the collapse of Japans bubble economy in the early '90s, financial pundits traced the roots of the recent crisis to Southeast Asia's having emulated the Japanese model, with its "cozy" relationships between government, banking, and industry. Under Japan's keiretsu system, for instance, banks, trading companies, and industrial firms share common stock holdings, an arrangement that lends itself to preferential -- and often unwise -- financial dealings. Similarly, South Korea's economy is characterized by close ties between its banks and its chaebol, the handful of giant conglomerates that dominate the economy. Under such a system, in which banks have an understandably tough time maintaining their objectivity and independence, Korean banks lent too much money to their industrial partners during good economic times, only to be left holding the bag when many of their ventures failed. Thus when Kia Motors collapsed last July, for example, it took the Korea First Bank down with it.

Until recently, rapid growth, coupled with lax accounting and disclosure policies, helped hide the tigers' bad lending practices, overextended banks, and the general lack of oversight of the region's financial institutions. In the months leading up to the storm, everyone from Money magazine to the International Monetary Fund was touting Southeast Asia's investment potential and economic fundamentals. When the bubble burst, however, the banks (and the financial experts) were caught with their proverbial pants down. And as talk of bailouts by the IMF swirled around Washington and Wall Street, a major sticking point in the deals became whether Asian leaders would accept the requisite financial reforms, including greater transparency in the region's financial systems, tighter loan standards, a crackdown on insolvent banks, and improved accounting procedures. The U.S. media joined in the call for reform. A Jan. 4 article in The Washington Post criticized the lack of government oversight of Thailand's banks as part of a "deregulated financial system run amok." Suggested the Post, "As with the savings and loan scandal in the United States, which led to a shakeout of the American finance sector and greater regulation, so too Asia might retool by cleaning up its banking mess."

One by one, with varying degrees of resistance, the ailing nations accepted the IMF's conditions, and soon the U.S. media were celebrating the coming westernization of East Asia's economies. Even China, which escaped the storm this time around, announced plans to restructure its banks more along the lines of the U.S. Federal Reserve system in an effort to "learn the lessons from Southeast Asia and adopt a more cautious approach," explained the governor of the People's Bank of China. U.S. financial pundits, although acknowledging the gravity of the situation, seemed positively gleeful that "the Asian miracle" had at last collapsed, offering definitive proof that Western capitalism is king. "This Year's Economic Lesson: Japan's Model Failed," proclaimed a headline in the Dec. 30 Wall Street Journal. "Asia Miracle Fades: Sun sets on crony capitalism," crowed the Nov. 26 USA Today.

With fallout from Asia rattling markets from Moscow to Sao Paolo, the international financial community launched discussions on how to prevent future meltdowns. Talk of a global regulatory system was bandied about by heavy hitters ranging from Treasury Secretary Robert Rubin to billionaire currency speculator George Soros, with Soros going so far as to assert that "the private sector is ill-suited to allocate international credit" and proposing an international oversight agency to help stabilize the world's banking system. (You know the situation is serious when the Ubercapitalists start sounding like World Federalists)

So, with all this excitement on the international financial scene, what have U.S. policy makers learned from the upheaval? Damn little, it appears. As a matter of fact, right up until Congress' winter recess -- even as South Korea & Co. were being told to westernize their financial systems ASAP -- members of the House were working fast and furiously to pass a bill that would move the U.S. banking system closer to that of South Korea or Japan. That's right, closer.

In late October, the House Commerce Committee put its stamp of approval on H.R. 10, aka...