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Sunday, February 22, 2009

Frankel: Is a Depression Ahead? Woodward and Hall: How Do We Create Good and Bad Banks?

Here are a couple of notable items I don't have time to do anything with. First Jeff Frankel:

A New Depression? The Lessons of the 1930s, by Jeff Frankel: We often hear the question “isn’t this economic crisis becoming as bad as the Great Depression?” Economists can offer a variety of reassurances, but each of them is quite circumscribed... [...continue reading...]

Next, Susan Woodward and Bob Hall:

The right way to create a good bank and a bad bank, by Woodward and Hall: Policymakers continue to struggle to figure out how to turn a troubled bank into a good bank and a bad bank. Under the good-bank/bad-bank policy, the good bank will operate free from concerns about troubled assets, because these assets will be held by the fully independent bad bank. Most discussions of the separation of a bank in this way presume that the government must inject a lot of new capital to create a well-capitalized good bank together with a still-solvent bad bank. The math seems simple–the troubled bank has almost no capital, so if the capital has to be split between the two banks, a well-capitalized bank will need new capital. [...continue reading...]

    Posted by on Sunday, February 22, 2009 at 12:33 PM in Economics, Financial System | Permalink  TrackBack (0)  Comments (11)


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