A binomial model of Geithner's toxic asset plan
AbstractThis paper formally models the Public-Private Investment Partnership (PPIP), a plan for U.S. government sponsored purchases of distressed assets. This paper solves both the problem of the asset manager buying toxic assets and the banks selling toxic assets. It solves for the fair market value of toxic assets implied by subsidized toxic asset sales, and it estimates the size of the government's subsidy. Moreover, this paper finds the circumstances under which banks and asset managers will meet at mutually acceptable prices. In general, healthier banks will be more willing sellers of toxic assets than zombies.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economics and Business.
Volume (Year): 63 (2011)
Issue (Month): 5 (September)
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Web page: http://www.elsevier.com/locate/jeconbus
Bailout Banking CMBS CDOs EESA Emergency Economic Stabilization Act Lending Legacy Loans Program Legacy Securities Program Mortgages Public-Private Investment Partnership PPIP TALF Term Asset-Backed Securities Loan Troubled Asset Relief Program (TARP) RMBS Too-big-to-fail Toxic assets Zombie banks;
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