The joint plan by the U.S. Treasury and the Federal Deposit Insurance Corporation (called the Paulson plan), announced on October 13, 2008, represented the largest financial transfer from taxpayers to financial institutions in U.S. history. Existing research has analyzed whether this massive state intervention improved the recipients? financial health, and thus in this study, we focus on its competitive distortion effects. Our investigation reveals that the Paulson plan was anything but neutral with respect to competition among industry participants. Both short- and long-term results confirm that the winners were the largest banks.JEL Codes: G2Keywords: TARP; The Paulson plan; Value Effect; Event Study; Distance to Default.
