Working Paper

Cleaning up the refuse from a financial crisis: the case for a resolution management corporation

Abstract: Systemic banking and financial crises invariably result in the transfer of a large volume of distressed financial assets into the hands of the government, which must later dispose of them. The fiscal and economic costs of the crisis and the speed of recovery depend on how effectively the government?s salvage operations can re-privatize these assets. To maximize the operations? effectiveness, I propose that the government create a temporary resolution management corporation. Drawing on Kane?s (1990) asset-salvage principles, as well as the U.S. experience with special-purpose entities for managing and disposing of assets stripped from distressed financial firms? balance sheets, I propose a design for such a corporation.

https://doi.org/10.26509/frbc-wp-201015

Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Working Papers (Old Series)

Publication Date: 2010

Number: 1015