If the goal is to rescue the banks, the Paulson bailout plan is one of the most expensive ways to go about it.

That's the conclusion of a paper titled "Paulson's Gift" by Luigi Zingales and Peitro Veronesi at the University of Chicago.

They do find one option that would be worse than the current Paulson plan. That would be the plan he originally proposed.

Suffice to say they're not big fans of our treasury secretary.

Zingales and Veronesi also argue that the plan hasn't done much to get lending started again.
"The biggest beneficiaries of this massive redistribution were the debtholders of financial institutions, especially those of the three former investment banks and of Citigroup" they write.

The paper is rough sledding. I'm trying to set up an interview so Luigi can explain it slowly.

categories: Understanding The Crisis

10:00 - November 5, 2008

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