Forming a Bad Bank under the FDIC by buying assets of troubled banks is sub-optimal for taxpayers:
1. Under the Bad Bank plan, the FDIC will pay for the bad assets of a troubled bank a price determined fairness/market/judgment/model. Pricing of bad assets may not be perfect. But this imperfectness basis of the claim that the Bad Bank plan is costlier and riskier to taxpayers than Self Management assets by each troubled bank.
2. Under my Self Management proposal, a troubled bank will be allowed (i) to peg its bad assets same price that the FDIC/Treasury will deem appropriate and (ii) to continue owning and managing assets.