Under typical plans, an owner's interest in a business is bought out, in part or in whole often through a bank loan with the stock being held in trust.
One of the ways the bad banks get involved is by stepping in before a developer defaults, effectively taking over the trust loan, albeit with higher returns and a longer life.
They also can step in and buy a developer's other outstanding debts such as accounts payable while demanding collateral in return, which similarly frees up the developer to repay its trust loan.
In past bailouts, including the Resolution Trust Corp. formed in 1989 to help resolve the savings-and-loan crisis, the ultimate taxpayer cost was magnitudes larger than originally projected.
One option is to set up a version of America's Resolution Trust Corporation, which inherited and sold off the assets of failed savings and loan associations in the early 1990s.
Trusts which are investment vehicles unique to China with little in common with Western-style trust firms enabled banks to stay below their loan quota by using an informal type of securitization to repackage bank loans as investment products.
The Resolution Trust Corp. came to life in 1989 after the failure of the Federal Savings and Loan Insurance Corp.
And the Peace Dividend Trust submitted an innovative loan guarantee model aimed at empowering local SMEs to bid for donor procurement contracts in post-conflict or post-disaster economies.
For advice, it sought out former regulators from the Resolution Trust Corporation, charged in the 1980s with cleaning up America's savings-and-loan (thrift) crisis, and from Securitas, which handled Sweden's banking crisis in the early 1990s.
The setup involves an existing trust, a sale of shares in his privately held property at a large discount, and a loan from Mr. Maggi among other things.
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