Klaus F. Zimmermann, Dorothea Schäfer, 13 June 2009

Banking sectors worldwide are still suffering from the effects of the financial crisis. This column presents a plan of how governments can efficiently relieve ailing banks of toxic assets by transferring them into bad banks, an idea that is gaining popularity.

Daniel Gros, 05 February 2009

Uncertainty over losses from toxic assets is blocking the resumption of bank lending – thus prolonging and deepening the recession. Governments should take over these assets to kick-start credit markets, but to avoid the “market for lemons” problem, the bad bank should be big, and banks should be forced to transfer their entire portfolio of toxic assets.


CEPR Policy Research