A binomial model of Geithner's toxic asset plan

Linus Wilson

Journal of Economics and Business, 2011, vol. 63, issue 5, 349-371

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; Securities; Loan; Troubled; Asset; Relief; Program; (TARP); RMBS; Too-big-to-fail; Toxic; assets; Zombie; banks (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:63:y:2011:i:5:p:349-371

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