We calculate the costs and benefits of the largest ever U.S. Government intervention in the financial sector announced the 2008 Columbus-day weekend. We estimate that this intervention increased the value of banks' financial claims by $131 billion at a taxpayers' cost of $25 -$47 billions with a net benefit between $84bn and $107bn. By looking at the limited cross section we infer that this net benefit arises from a reduction in the probability of bankruptcy, which we estimate would destroy 22% of the enterprise value. The big winners of the plan were the three former investment banks and Citigroup, while the loser was JP Morgan.
|Date of creation:||Oct 2009|
|Date of revision:|
|Publication status:||published as Veronesi, Pietro & Zingales, Luigi, 2010. "Paulson's gift," Journal of Financial Economics, Elsevier, vol. 97(3), pages 339-368, September.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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