ABSTRACT
Th e 2007 crisis spread internationally across the fi nancial system and resulted in an unprecedented global banking systemic contagion. Aft er their traditional hunt for culprits, governments, regulators, and politicians have explored the usual solutions, that is, providing some fi nancial assistance, purchasing toxic assets, and changing the regulation to keep the banks afl oat. All these solutions are known to
be subject to moral hazard by potentially encouraging excessive risk taking and giving banks the incentive to engage in gambling for resurrection. In this chapter, we discuss an alternative solution, namely, their collaboration with hedge funds and private pools of capital in order to rescue the banking system.
