We calculate the costs and benefits of the largest ever U.S. Government intervention in the financial sector announced the 2008 Columbus-day weekend. We estimate that this intervention increased the value of banks' financial claims by $131 billion at a taxpayers' cost of $25 -$47 billions with a net benefit between $84bn and $107bn. By looking at the limited cross section we infer that this net benefit arises from a reduction in the probability of bankruptcy, which we estimate would destroy 22% of the enterprise value. The big winners of the plan were the three former investment banks and Citigroup, while the loser was JP Morgan.
*University of Chicago Booth School of Business, National Bureau of Economic Research and Center for Economic Policy Research. We thank Douglas Diamond, Ralph Koijen, Neill Pearson, Jeremy Stein for very helpful comments, Francesco D'Acunto and Federico De Luca for excellent research assistantship, and Peggy Eppink for editorial assistance. Luigi Zingales thanks the IGM Center at the University of Chicago for financial support. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.