The rescue was not entirely successful in restoring the banking sector's credit functions to a productive role in the Mexican economy. The article also attempts to place the overall rescue effort within a larger context by looking at its economic and political consequences. The Mexican experience suggests that country-specific factors can profoundly affect the success of government policies. The outcome of the bailout in Mexico was significantly shaped by the process of political democratization under way there. The polemical debate surfacing out of the legislative battle over the costs of the bank rescue demonstrates the need for governments to pay more attention to political matters, even when the problems appear economic or technical in nature.
Most people are familiar with retail payments systems such as checks and credit cards.
Less familiar are wholesale payments systems, which consist of electronic networks used for sending large sums among banks. A feature common to all wholesale networks is that settlement is carried out by exchange of funds held in banks' reserve accounts at a central bank, though the rules for settlement vary. This article considers the question of what is the best design for a wholesale payments system, in particular whether it should settle on a net or a real-time gross basis, and some of the difficult policy questions facing both participants and regulators of wholesale systems. The authors show that for the benchmark case in which bank asset quality is fixed and bank assets can always be liquidated at book value, the advantages of some type of net settlement dominate real-time gross settlement. However, the optimal net settlement scheme may necessarily involve some chance of default.