The Disposition of Failed Japanese Bank Assets: Lessons From the U.S. Savings and Loan Crisis
- Topics:
- Commercial Banking
- Tags:
- Crisis,
- Federal Reserve Bank Of San Francisco,
- Finance,
- Financial Services,
- Government,
- Guarantee,
- Operational Accounting,
- Regulations
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Overview: This paper reviews the Japanese experience with "put guarantees'' offered in the sale of several failed banks. These guarantees, meant to address information asymmetry problems, are shown to create moral hazard problems of their own. These issues also arose in the U.S. savings and loan crisis. Regulators in that crisis turned to an alternative guarantee mechanism known as "loss-sharing arrangements'' with apparently positive results. The results show that both forms of guarantees reduce expected regulator revenues and that the impact of economic downturns on the relative desirability of the two guarantees is ambiguous.
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Format: PDF | Size: 268KB | Date: Jun 2002 | Pages: 15
