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Dealing with the Financial Crisis
J. Bradford DeLong's Grasping Reality with All Eight Tentacles —
... The right way to create a good bank and a bad bank « Financial Crisis and Recession: Most discussions... presume that the government must inject a lot of new capital to create a well-capitalized good bank together with a still-solvent bad bank.... But... we can create a good bank with a big cushion of capital while keeping the bad bank as solvent as the existing integrated bank. The key idea–from Jeremy Bulow–is that the bad bank owns all of the equity in the good bank.... The good bank will continue to operate under the [established] brands as a ...
If You Liked The Lehman Bankruptcy You'll Love This...
JustOneMinute —
... are talking up an admirably creative idea to create turn a weakly-capitalized bank into a good bank and a bad bank without the requirement of any new money. The gist - transfer bad assets and non-deposit liabiliotes to a non-operating entity (I would suggest a transfer to the holding company level.) Leave the deposits and the good assets in the bank. The holding company has the equity in the bank, so the numbers still add up. However, the bank is well-capitalized and depopsits are safe. My objections: 1. I dispute the premise that protecting deposits is the only ...
Morning Skim: Bailout Equality; Links for Econ Geeks; an Oscar Invite
Opinionator —
... at the Financial Times, who’s been pushing the good bank solution for some time; the second from the blog Financial Crisis and Recession , which shows how to create a good bank and bad bank from Citibank, a plan which ...
