The Default-Prone U.S. Toxic Asset Auction Plan

Applying auction theory to the toxic-asset rescue plan currently released by the United States Treasury Department, this paper demonstrates an equilibrium where moderately poor bidders outbid rich bidders in such auctions. After defeating their rich rivals and acquiring the toxic assets, such bidders will default on government-provided loans whenever the toxic assets turn out to be unsalvageable. An alternative mechanism is discussed.

Bicentennially Speaking…

On the anniversary of the date of Thomas Jefferson's birth (13 April 1743) the United States Treasury Department is bringing back the $2 bill, which has not been in production for the past ten years. The reissue of the $2 bill is part of the commemoration of the Bicentennial.