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Yves Smith on Good Bank/Bad Bank Scenario March 10, 2011

Posted by larry in economics, Good Bank Vs Bad Bank.
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Yves Smith has a post on whether the Bank of America will initiate a good bank/bad bank split of the institution in the context of the Dodd-Frank bill.  This is not a new idea and was discussed in relation to the current crisis in early 2009 by a number of commentators.  I shall simply provide a list of links, all active at the time of posting, so that readers can make up their own minds about the viability of this way of thinking.  Personally, I think it is a good idea and Iceland has effectively done it, though not in the way some of the following commentators have suggested.

Naked Capitalism:
http://www.nakedcapitalism.com/2011/03/bofa-bad-bank-for-legacy-assets-will-this-eventually-be-a-first-use-of-dodd-frank-resolution-powers.html

Hall and Woodward (Citicorp illus.):
http://www.voxeu.org/index.php?q=node/3132

Willem Buiter:
http://www.voxeu.org/index.php?q=node/3264 (RBS illus.)

http://blogs.ft.com/maverecon/2009/01/the-good-bank-solution/

http://blogs.ft.com/maverecon/2009/02/good-banknew-bank-vs-bad-bank-a-rare-example-of-a-no-brainer/

http://online.wsj.com/article/SB123517593808837541.html

http://blogs.ft.com/maverecon/2009/02/save-banking-not-the-bankers-or-the-banks-the-case-of-ing/

Soros:
http://online.wsj.com/article/SB123371182830346215.html

Paul Romer:
http://online.wsj.com/article/SB123388681675555343.html

James Kwak:
http://baselinescenario.com/2009/01/21/bad-bank-aggregator-bank-beginners/

Minuteman:
http://remington-work.blogspot.com/2008/08/return-of-good-bank-bad-bank.html

Herlihy & Wasserman (firewalled):
Making
the Good Bank/Bad Bank Structure Work, International Financial Law Review, 1992

Jonathan Macey:
http://www.sns.se/document/occasional_paper_82.pdf

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