Most discussions of the "aggregator bank" have presumed that it would follow the outline set down by Paulsen and Bernanke in October, namely
(a) that it would use reverse auction method to determine prices (often objected to because of "information asymetry" -- that the banks, who know their holdings best, would dump their worst on the government);
(b) that the USG would have to overpay for assets for this to work at all, since it if payed fair market value, the banks would be insolvent; and
(c) it would result in no government stakes in the bank, and no participation in the upside.
But an article on the front page of Wednesday's FT gives an almost diametrically opposite plan. After saying that "Senior Wall Street executives said yesterday that they ahd been sounded out on plans for an 'aggregator bank' that would purchase toic assets from banks," the article goes on to say:
<quote>
Under one of the plans discussed, toxic assets would be valued by an independent party. Where assets are purchased at prices below their book values, the government might then inject common equity into the banks to make up for capital wiped out by the sales.
<unquote>
It's only a sketch, but like I said, it represents a completely different take than the Paulsen plan. There's no paying above market value and there are equity stakes, perhaps substantial ones.
The devil's in the details, but at first sight, as a floorplan, this doesn't sound stupid, either economically or politically.
So maybe the "aggregator bank" idea shouldn't be trashed sight unseen.
Michael