Despite the uncomfortable and ominous surroundings, the meetings were productive. Whereas Paulson’s TARP model was based on the idea of buying bad assets, London brought together two ideas: guarantees and recapitalization. Like Ireland and Germany, London would offer guarantees. The Bank of England and the Treasury would underwrite debt issuance by the banks. But these guarantees would be conditional on recapitalization either through market investment or from public funds. The details were worked out in frantic meetings in Whitehall and road tested with focus groups of investment bankers who
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