Ozlem Akin, Christian Fons-Rosen, José-Luis Peydró, 29 October 2020

There are widespread concerns about potentially excessive connections between the financial sector and political institutions. Less is known about the intensity of information flows between the public and private sector. This column examines insider trading surrounding the largest bank bailout in history, the 2008 US Troubled Asset Relief Program. In politically connected banks, insider buying during the pre-TARP period is associated with increases in abnormal returns around bank-specific TARP announcements. Information transmission seems to be a third pillar of the mutually beneficial relationship between finance and politics, possibly allowing bankers to use their political connections for personal gain.

Augustin Landier, Kenichi Ueda, 25 July 2009

Bank restructuring is a source of disagreement on both sides of the Atlantic, and no clearly preferred policy approach has emerged. This column compares the costs to taxpayers of using recapitalisation, asset guarantees, and asset sales. In many circumstances, asset sales are an inferior tool.

Barry Eichengreen, 28 September 2008

The Paulson Plan, whatever its final form, will not end the crisis quickly. Unemployment will rise but will the most serious credit crisis since the Great Depression bring about a new depression? Here one of the world’s leading economic historians identifies the relevant Great-Depression lessons. We won’t see 25% unemployment as in the 1930s, but double digits are not out of the question.

Avinash Persaud, 27 September 2008

This column suggests that TARP is the wrong solution, but it might buy time to develop a better plan. Such a plan could involve a private debt-for-equity swap with the government co-investing in the equity. This would put tax payers in hock for something like $70bn rather than $700bn. Managers and shareholders would take the biggest hit, but bond holders would share the pain.

Vox Talks

CEPR Policy Research