belated acceptance for intervention, protection

Since September, several banks on both sides of the Atlantic have seen major government intervention, from Washington Mutual and Wachovia in the United States to Fortis, Glitnir, Dexia and Hypo Real Estate in Europe.

Meanwhile, central banks have been cutting rates and pumping liquidity into the markets for fear the credit crunch will claim more victims, while a number of authorities have also raised deposit guarantees to prevent runs on banks.

Indeed, the situation is not that different from what Thailand did to save the financial system following the eruption of the 1997 crisis.

Back then, a number of Thai banks faced official intervention, while 56 finance companies were shut down. Over four years, and after spending more than a trillion baht, the tom yam kung crisis was brought to an end.

Still, all those tactics were condemned internationally and the government was accused of creating moral hazard. It was said that depositors would be encouraged to remain reckless, as their money - though deposited at high-risk institutions - would enjoy similar protection to that lodged at lower-risk institutions that paid lower returns.

It had until now been assumed that depositors in the western hemisphere knew better where to park their money. The deposit guarantee agencies thus limited the amounts they were paying out to depositors in the event of an institution failing.

But the current situation tells otherwise. Depositors anywhere can be panicked, and the authorities anywhere need to do what Thailand did over 10 years ago.

Now the world knows that only intervention and deposit protection will stop the wounds in the financial system.

The only difference is that Thailand had to work so hard to win the funds needed to finance the process. As such, it had to yield to all the conditions that were attached, which made it so difficult for the injection of cash into the system. As a result, the bank lending rate then hovered at nearly 20 per cent.

Yet, in the US and Europe, they need not to ask for anyone else's permission to act. When Ireland announced a blanket guarantee on deposits on September 30, other European countries were left in bewilderment as deposits in their countries could flow to the new safe haven.

Being a big economy can be good in this way, as nobody can preach against such power. Thais may have no sympathy for them, but they should realise that if we had saved more and been richer, we would not have had to surrender to others' demands 11 years ago.