Sweden 1991

"Risky lending practices, poor reporting transparency, and a booming real estate market led to a major meltdown in a large, established banking system. A weak regulatory framework was in dire need of an overhaul, and the government had no choice but to step in and take direct action in the banking sector."

That paragraph is about Sweden in 1991, but I'd forgive you for thinking "Washington, D.C. last week."

This time, there's a Greek chorus of respectable voices behind me, too. Bloomberg, The New York Times, and The Wall Street Journal all ran similar opinion pieces last week, pointing out the similarities between "the here and now" and "Scandinavia in the early 1990s."

In short, the credit crisis described above was stopped in its tracks by unblinkingly severe action among the Swedish, Norwegian, and Finnish central banks. Some of the largest Scandinavian banks were taken over by the local governments, while others were simply allowed to fail, but with government guarantees for their debt payments. All of the central banks raised interest rates to shockingly high levels. When the central lending rate sits at 500% -- however briefly -- you might as well just shut down bank lending altogether.

It was tough. It was expensive. Unemployment rates soon exploded, and the stock markets in Oslo, Helsinki, and Stockholm suffered dearly. But five years later, these banking systems were back on their feet and started lending out money again. Finnish phone giant Nokia (NYSE: NOK) was a 20-bagger in five years, starting in 1995, while rivals such as Motorola (NYSE: MOT) merely doubled. The Swedish precursor to today's pharmaceutical titan AstraZeneca (NYSE: AZN) tripled in three years, keeping up with American contemporaries such as Merck (NYSE: MRK). The crisis was over.