NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Informational Rents, Macroeconomic Rents, and Efficient Bailouts

Thomas Philippon, Philipp Schnabl

NBER Working Paper No. 16727
Issued in January 2011
NBER Program(s):   CF   EFG   ME   PE

We analyze government interventions to alleviate debt overhang among banks. Interventions generate two types of rents. Informational rents arise from opportunistic participation based on private information while macroeconomic rents arise from free riding. Minimizing informational rents is a security design problem and we show that warrants and preferred stocks are the optimal instruments. Minimizing macroeconomic rents requires the government to condition implementation on sufficient participation. Informational rents always impose a cost, but if macroeconomic rents are large, efficient recapitalizations can be profitable.

download in pdf format
   (446 K)

email paper

This paper is available as PDF (446 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w16727

Published: “Effi cient Recapitalization,” with Philipp Schnabl, Journal of Finance, February 2013, lead articl e

Users who downloaded this paper also downloaded these:
Philippon and Schnabl w14929 Efficient Recapitalization
Gorton and Huang w9158 Liquidity, Efficiency and Bank Bailouts
Mishkin w16755 Monetary Policy Strategy: Lessons from the Crisis
Philippon and Skreta w15785 Optimal Interventions in Markets with Adverse Selection
Farhi and Tirole w15138 Collective Moral Hazard, Maturity Mismatch and Systemic Bailouts
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us