I’ve been thinking about ways to set up an “aggregator bank,” [Aggbank] much as I would rather see RTC 2 come into existence.? If we are going to allow banks that are live try to shed their dud assets to the Aggbank, then, maybe this is a way that it should be done:

Aggbank needs real advice on assets.? Not just fakery from large asset managers, who might be doing favors for friends, but independent skeptical advice that realizes that many of the assets will not be “money good.”? Here is my advice:

Aggbank should solicit offers of assets, with prices.? It should then publish that it will buy so much of assets that have been offered, so if anyone is willing to sell it cheaper, submit their offers.

The winning offers hand over the assets and receive cash in return.? They also hand over two securities: a senior loan agreement and common equity 50/50, in exchange for an equity stake in Aggbank, equal to the price that the asset was sold for.? The equity stake is reducible/increasible if the eventual value of the asset sold proves less or more than the price it was sold for.

This provides reasonable incentives for fair sale prices, and protection to taxpayers, while allowing banks to lighten their inventories of illiquid assets.