A Binomial Model of Geithner’s Toxic Asset Plan
57 Pages Posted: 2 Jul 2009 Last revised: 15 Apr 2012
Date Written: November 30, 2010
Abstract
This 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.
Keywords: 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 Lending Facility, Troubled Asset Relief Program,TARP, RMBS, toxic assets,zombies
JEL Classification: G12, G13, G18, G21, G28, G38
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Common (Stock) Sense about Risk-Shifting and Bank Bailouts
By Linus Wilson and Yan Wendy Wu
-
Debt Overhang and Bank Bailouts
By Linus Wilson
-
Debt Overhang and Bank Bailouts
By Linus Wilson
-
The Put Problem with Buying Toxic Assets
By Linus Wilson
-
By Linus Wilson
-
By Linus Wilson
-
Taking TARP Funds Can Be Hazardous to Your Bank's Wealth
By Dan J. Jordan, Douglas Rice, ...
-
Valuing the First Negotiated Repurchase of the TARP Warrants
By Linus Wilson
-
By Linus Wilson and Yan Wendy Wu
-
Slicing the Toxic Pizza: An Analysis of FDIC’s Legacy Loan Program for Receivership Assets
By Linus Wilson