Do banking-system bailouts work? Yes. But some work better than others. They're also mind-bogglingly expensive.
Unfortunately the current Hanke-Panke Plan shares a few attributes with the bailouts that didn't work so well...and its price tag is likely being vastly understated. This is why we expect Paulson (or his successor) will soon be back on Capitol Hill with a new plan, begging Congress for more money.
Analyst John Mauldin's Outside The Box email this week features a summary of the Luc Laevan and Fabian Valencia study of 42 recent bailouts. John excerpts the work of Philippa Dunne and Doug Henwood of The Liscio Report, who analyze the study in detail. Here are the key points: