Foreigners, especially Americans, are always trying to 'save' Japan. Convinced they are the only ones capable of miracles, they nearly fall off the plane at Narita airport in their dark suits and braces, ready to remake the world's second largest - and arguably very troubled - economy into one more properly reflecting the verities of Wall Street's capitalism. Of course, these interlopers also assume they ought to profit handsomely from their efforts, for while their ambitions may be missionary, they have not sworn any vows of poverty.
Yet, most of the time these solemn commitments to 'turn around' a troubled company or 'remake Japan' dissolve a short time later in anger and recrimination. Six months or two years after leasing fancy new offices and putting up splashy billboards, the invaders pick up and go home again, pulling one of several well-worn excuses out of their quiver. The weak economy at home would not support a long-term investment. The returns have not been as projected. The Japanese partner welched on a promised opportunity.
Stockbrokers Merrill Lynch and Charles Schwab and retailer Rei are just three recent examples of firms who made huge splashes when they first came to Tokyo, then left shortly after with their tails between their legs. Close the door behind you on the way out.
Gillian Tett's book Saving the Sun chronicles the demise of one of Japan's hoariest financial institutions, the Long Term Credit Bank (LTCB), and the saga by American 'vulture capitalist' Timothy Collins and his Ripplewood Holdings to revive the franchise and thereby change the rules of Japan's insular, insulated and debt-ridden banking system.
The timing of this publication could not be much better. In May, the Japanese government was forced into a US$17 billion bailout of Resona Bank, the nation's fifth largest lender - after declaring repeatedly that the nation's banks were robust and on the road to recovery from their bad-debt overhang. And in mid-August, Ripplewood - the same firm that bought LTCB's assets and remade the institution into Shinsei Bank - announced it had engineered the first leveraged buyout ever concluded in Japan, paying US$2.2 billion for the fixed-line telephone business of Japan Telecom Holdings from Vodafone.
This book spends a great deal of time examining again the reasons behind LTCB's spectacular collapse in October 1998, when the government was forced to nationalise the bank because its capital deficit exceeded US$2 trillion, the result of spectacularly poor lending practices, especially in wild hotel and property deals. The government was forced to take over the bank because it had created so many derivative-related speculations that its meltdown might have caused a 'systemic risk' to the world's banking system. The laborious attempts by regulators to paper over earlier problems, and delay any resolution of LTCB's shrinking capital base, only exacerbated the cost of the final resolution.
A former Financial Times correspondent based in Tokyo, Tett relies on a novelistic style to describe Mr Collins, the opportunistic Kentucky 'cowboy' and Wall Street turnaround artist who ended up buying LTCB's assets with a lot of the Japanese government's own money. To help create his new financial institution, he hired Masamoto Yashiro, the western-infused businessman who used to run Citibank's operation in Japan, and relied on the political clout of men like former Federal Reserve chairman Paul Volker and Vernon Jordan, golfing partner and adviser to then US president Bill Clinton, to help clinch the deal.