Discussion paper

DP7528 Paulson's Gift

We calculate the costs and benefits of the largest ever U.S. Government intervention in the financial sector announced the 2008 Columbus-day weekend. We estimate that this intervention increased the value of banks? financial claims by $131 billion at a taxpayers?cost of $25 -$47 billions with a net benefit between $84bn and $107bn. By looking at the limited cross section we infer that this net benefit arises from a reduction in the probability of bankruptcy, which we estimate would destroy 22% of the enterprise value. The big winners of the plan were the three former investment banks and Citigroup, while the loser was JP Morgan.


Zingales, L and P Veronesi (2009), ‘DP7528 Paulson's Gift‘, CEPR Discussion Paper No. 7528. CEPR Press, Paris & London. https://cepr.org/publications/dp7528