The Default-Prone U.S. Toxic Asset Auction Plan

Charles Zheng

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: Applying auction theory to the toxic-asset rescue plan currently released by the United States Treasury Department, this paper demonstrates an equilibrium where moderately poor bidders outbid rich bidders in such auctions. After defeating their rich rivals and acquiring the toxic assets, such bidders will default on government-provided loans whenever the toxic assets turn out to be unsalvageable. An alternative mechanism is discussed.

Keywords: auction; toxic assets; default; rescue plan (search for similar items in EconPapers)
Date: 2009-03-30
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in B.E. Journal of Economic Analysis & Policy, April 2009, vol. 9 no. 1 (Contributions)

Downloads: (external link)
http://www2.econ.iastate.edu/papers/paper_13056_09005.pdf (application/pdf)

Related works:
Journal Article: The Default-Prone U.S. Toxic Asset Auction Plan (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:13056

Access Statistics for this paper

More papers in Staff General Research Papers Archive from Iowa State University, Department of Economics Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070. Contact information at EDIRC.
Bibliographic data for series maintained by Curtis Balmer ().