Troubling Research on Troubled Assets: Charles Zheng on the U.S. Toxic Asset Auction Plan

Econ Journal Watch, Vol. 8, No. 1, pp. 33-38, 2011

9 Pages Posted: 24 Nov 2010 Last revised: 29 Mar 2012

See all articles by Linus Wilson

Linus Wilson

University of Louisiana at Lafayette - College of Business Administration

Date Written: November 19, 2010

Abstract

(Zheng, 2009) does not realize that the government provides nonrecourse loans to investors to buy toxic assets. Nonrecourse loans allow the borrower to walk away from the loan with no penalties besides ceding the asset that the loan purchased. Thus (Zheng, 2009)’s conclusions that less well endowed borrowers will win toxic asset auctions are erroneous. Further (Zheng, 2009)’s use of auctions to model these plans is largely inappropriate since only one of the three government toxic asset plans has government backed investors bid for the same toxic asset in an auction format.

Keywords: auctions, 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 Lending Facility, Troubled Asset Relief Program, TARP, RMBS, toxic assets

JEL Classification: G12, G13, G18, G21, G28, G38

Suggested Citation

Wilson, Linus, Troubling Research on Troubled Assets: Charles Zheng on the U.S. Toxic Asset Auction Plan (November 19, 2010). Econ Journal Watch, Vol. 8, No. 1, pp. 33-38, 2011. Available at SSRN: https://ssrn.com/abstract=1712430 or http://dx.doi.org/10.2139/ssrn.1712430

Linus Wilson (Contact Author)

University of Louisiana at Lafayette - College of Business Administration ( email )

Department of Economics & Finance
214 Hebrard Blvd., Room 326
Lafayette, LA 70504-0200
United States
(337) 482-6209 (Phone)
(337) 482-6675 (Fax)

HOME PAGE: http://www.linuswilson.com

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