Bailing Out Finance: How Will It End?

Safra professor of economics Jeremy C. Stein and University of Chicago economist Anil Kashyap outline the options, as they see them, for the federal government's promised $700-billion bailout for financial firms...

Writing in today's New York Times, Safra professor of economics Jeremy C. Stein and University of Chicago economist Anil Kashyap outline the options, as they see them, for the federal government's promised $700-billion bailout for financial firms.

Above all, the op-ed by Stein and Kashyap underscores how little is known about what form the bailout will take. Will the government simply buy distressed assets at their current value and hold them until the crisis passes and their value rises again? Will it overpay for these assets to subsidize failing firms, and thus provide them with the capital they need to stay afloat? Will it act as a "bankruptcy judge" for these firms, negotiating firms' debt down in exchange for government assistance? Will it restructure mortgages to help troubled homeowners (a more aggressive intervention)?

"For now," the authors write, "all we can do is make educated guesses."

Read the full op-ed here.

You might also like

Harvard Panel Debunks the Population Implosion Myth

Public health professors parse the evidence surrounding falling U.S. birth rates.

A New Narrative of Civil Rights

Political philosopher Brandon Terry’s vision of racial progress

How AI Could Be Raising Your Energy Bill

Utilities shift AI infrastructure costs onto consumers.

Most popular

How MAGA Went Mainstream at Harvard

Trump, TikTok, and the pandemic are reshaping Gen Z politics.

Harvard art historian Jennifer Roberts teaches the value of immersive attention

Teaching students the value of deceleration and immersive attention

Shakespeare’s Greatest Rival

Without Christopher Marlowe, there might not have been a Bard.

Explore More From Current Issue

Room filled with furniture made from tightly rolled newspaper sheets.

A Paper House in Massachusetts

The 1920s Rockport cottage reflects resourceful ingenuity.

Whimsical illustration of students rushing through ornate campus gate from bus marked “Welcome New Students.”

Highlights from Harvard’s Past

The Medical School goes coed, University poet wins Nobel Prize. 

Julie Riew, wearing a white dress, playing guitar and singing into a microphone on stage.

Bringing Korean Stories to Life

Composer Julia Riew writes the musicals she needed to see.