Paulson's Gift

Luigi Zingales and Pietro Veronesi

No 7528, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We calculate the costs and benefits of the largest ever U.S. Government intervention in the financial sector announced the 2008 Columbus-day weekend. We estimate that this intervention increased the value of banks? financial claims by $131 billion at a taxpayers?cost of $25 -$47 billions with a net benefit between $84bn and $107bn. By looking at the limited cross section we infer that this net benefit arises from a reduction in the probability of bankruptcy, which we estimate would destroy 22% of the enterprise value. The big winners of the plan were the three former investment banks and Citigroup, while the loser was JP Morgan.

Keywords: Government intervention; Bankruptcy; Credit crisis (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2009-11
New Economics Papers: this item is included in nep-bec and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Paulson's gift (2010)
Working Paper: Paulson's Gift (2009)
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