TY  - JOUR
AU  - Philippon,Thomas
AU  - Schnabl,Philipp
TI  - Informational Rents, Macroeconomic Rents, and Efficient Bailouts
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 16727
PY  - 2011
Y2  - January 2011
UR  - http://www.nber.org/papers/w16727
L1  - http://www.nber.org/papers/w16727.pdf
N1  - Author contact info:
Thomas Philippon
New York University
Stern School of Business
44 West 4th Street, Suite 9-190
New York, NY  10012-1126
Tel: 212/998-0490
Fax: 212/995-4233
E-Mail: tphilipp@stern.nyu.edu

Philipp Schnabl
Stern School of Business
New York University
44 West Fourth Street
New York, NY 10012
Tel: 212/998-0356
E-Mail: schnabl@stern.nyu.edu
AB  - 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. 
ER  -