Yves Smith on Good Bank/Bad Bank Scenario March 10, 2011Posted by larry in economics, Good Bank Vs Bad Bank.
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.
Hall and Woodward (Citicorp illus.):
http://www.voxeu.org/index.php?q=node/3264 (RBS illus.)
Herlihy & Wasserman (firewalled):
Making the Good Bank/Bad Bank Structure Work, International Financial Law Review, 1992