Is the U.S. headed for a tequila crisis?

Reuters published an article today concerning J.P. Morgan and financial-crisis lawsuits, alluding to our reading this week out of Paul Krugman’s book on financial crises. Krugman criticizes the international community for not learning from their mistakes, specifically for not avoiding the Asian financial crisis by looking back at the warning signs seen within the tequila crisis in Mexico and Latin American financial distress. The Reuters article alarmed me to an extent because of this logic. The authors write that major U.S. bank Wells Fargo has been “misleading the government in a “longstanding and reckless” pattern of certifying the quality of questionable home loans.”

In addition to the alleged mismanagement, the authors include that “instead of quickly settling the charges, as has happened in most financial-crisis cases, Wells Fargo is contesting the allegations.” I was immediately reminded of the tequila crisis in Mexico, where the government, with no good economic standing to rest upon, was incredibly cooperative and willing to own up to its mistakes, swallow its pride, and follow U.S. direction in avoiding national insolvency. Although Krugman is quick to point out that Mexico was luckier than anything else in their economic recovery, without the government’s cooperation they certainly would not have recovered. Is Wells Fargo crippling itself and by extension the U.S. in remaining so uncooperative?

The mitigating factor in this instance is the history of long-standing democracy and good governance in the United States. Yes, big banks are now less willing to continue to pay for their mistakes in relation to the financial crisis four years ago, but the American government continues to hold these Wall Street companies responsible for their mistakes in order to help pay for the recession they caused. This is no Mexican tequila crisis—a responsible government exists that, void of corruption, knows how to hold responsible parties liable.

In the interest of playing devil’s advocate, there’s also the question that banks are posing as to whether the American government truly is acting in the best interest of the common good. JPMorgan, another bank that is fighting the charges laid against it recently, has received criticism from some for its relationship with the government in conjunction with alleged tax fraud. The authors of the article point out that “for years, government enforcers have been criticized for not being forceful enough in pursuing marquee Wall Street banks and bankers for recklessly churning out loans, then spreading around the risk by repackaging and selling securities backed by those loans.”

Is the government corrupt in supporting big business with the probability of a return in capital or do the new investigations suggest a successful embodiment of the American system of checks and balances? It’s my hope that the latter is true, but possibly just because the pessimistic Nihilism of the former view is too discouraging to consider. What do you think?