For a state governor, the ultimate third-party payer is the federal government.

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For all intents and purposes, Professor Cochrane is explaining the economics of third-party payer, which occurs when government intervention undermines the ability of markets to promote efficiency and low prices.

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So rather than borrow the 19bn euros from third-party investors in the normal way, the Spanish government wants to give Bankia 19bn euros of its bonds in return for a majority stake in the bank - or so the FT says.

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