This book develops a model that compares two bad bank concepts: on one side, it examines a complete sale of toxic assets held by a bank to a state-owned bad bank, while on the other side, it analyzes a transaction that resembles a repurchase agreement. In both concepts, a critical value can be calculated at which a bank manager is willing to relinquish the toxic assets. By participating in these concepts, the bank's probability of solvency improves, allowing it to issue new loans. Therefore, both bad bank concepts are suitable for restoring financial stability and avoiding a credit crunch. However, the expected costs for taxpayers differ.