Cleaning Up the Refuse from a Financial Crisis: The Case for a Resolution Management Corporation

28 Pages Posted: 5 Oct 2010

Date Written: September 30, 2010

Abstract

Systemic banking and financial crises invariably result in the transfer of a large volume of distressed financial assets into the hands of the government, which must later dispose of them. The fiscal and economic costs of the crisis and the speed of recovery depend on how effectively the government’s salvage operations can re-privatize these assets. To maximize the operations’ effectiveness, I propose that the government create a temporary resolution management corporation. Drawing on Kane’s (1990) asset-salvage principles, as well as the U.S. experience with special-purpose entities for managing and disposing of assets stripped from distressed financial firms’ balance sheets, I propose a design for such a corporation.

Keywords: G01, G21, G28

JEL Classification: Asset salvage, bad bank, crisis resolution

Suggested Citation

Thomson, James B., Cleaning Up the Refuse from a Financial Crisis: The Case for a Resolution Management Corporation (September 30, 2010). FRB of Cleveland Working Paper No. 10-15. Available at SSRN: https://ssrn.com/abstract=1687309

James B. Thomson (Contact Author)

University of Akron ( email )

Akron, OH 44325-4803
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
50
Abstract Views
291
PlumX Metrics