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Making Sense of the Aggregator Bank

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Abstract

On Tuesday, 10 February 2009, Treasury Secretary Geithner proposed the aggregator bank (“public-private investment fund”) as a key instrument to resolve the financial crisis (www.financialstability.gov). The Treasury description leaves many issues unanswered. Here we explain how an aggregator bank might operate in practice. We fill in some of the major details so as to enhance the effectiveness of the aggregator bank. In particular, the approach emphasizes transparency and value to the taxpayer, minimizing the need for bank-by-bank negotiations and thereby minimizing the opportunities for the government to play favorites.

Suggested Citation

  • Lawrence M. Ausubel & Peter Cramton, 2009. "Making Sense of the Aggregator Bank," Papers of Peter Cramton 09msab, University of Maryland, Department of Economics - Peter Cramton, revised 2009.
  • Handle: RePEc:pcc:pccumd:09msab
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    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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