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No Substitute for the 'P'-Word in Financial Rescue

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Abstract

Three months and three-hundred billion dollars of bank rescue efforts have gotten bogged down in a widespread and irrational fear among policymakers: the fear of trying to put a price on banks’ troubled assets. So profound is this fear that the Bush Treasury opted instead for the “suitcase approach,” where large sums of cash were delivered to banks (solvent and insolvent alike) with few strings attached. The government needs to restore the banking sector, while protecting the interests of taxpayers. There is no substitute for the P-word.

Suggested Citation

  • Lawrence M. Ausubel & Peter Cramton, 2009. "No Substitute for the 'P'-Word in Financial Rescue," Papers of Peter Cramton 09fop, University of Maryland, Department of Economics - Peter Cramton, revised 2009.
  • Handle: RePEc:pcc:pccumd:09fop
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    Cited by:

    1. Thomas Philippon & Vasiliki Skreta, 2012. "Optimal Interventions in Markets with Adverse Selection," American Economic Review, American Economic Association, vol. 102(1), pages 1-28, February.

    More about this item

    Keywords

    Auctions; financial auctions; financial crisis;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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