Posted on Tuesday, March 31, 2009 at 11:59 pm

becker.jpgGary Becker: Perhaps good reasons motivate the government to use this indirect way to subsidize banks rather than to give them the subsidy directly. However, it is a strange program indeed where banks get subsidized in proportion to how many “bad” assets they hold. This will make banks wish that they had made even greater mistakes, and held more assets that are likely to be truly worthless. However, these worthless assets could be worth a fortune to banks. See here.