The Treasury proposes to invest $700 billion in mortgage-related securities to resolve the financial crisis, using market mechanisms such as reverse auctions to determine prices. A well-designed auction process can indeed be an effective tool for acquiring distressed assets at minimum cost to the taxpayer. However, a simplistic process could lead to higher cost and fewer securities purchased. It is critical for the auction process to be designed carefully.
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Paper provided by University of Maryland, Department of Economics - Peter Cramton in its series Papers of Peter Cramton with number
08adcfrp.
Length: 3 pages Date of creation: 2008 Date of revision:
2008 Publication status: Published in The Economists' Voice, 5:5, www.bepress.com/ev/vol5/iss5/art5, September 2008 Handle: RePEc:pcc:pccumd:08adcfrp
Contact details of provider: Postal: Economics Department, University of Maryland, College Park, MD 20742-7211 Phone: (202) 318-0520 Fax: (202) 318-0520 Web page: http://www.cramton.umd.edu
For technical questions regarding this item, or to correct its listing, contact: (Peter Cramton).
Find related papers by JEL classification: D44 - Microeconomics - - Market Structure and Pricing - - - Auctions G01 - Financial Economics - - General - - - Financial Crises G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
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