Word: toxication
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...ready for the Toxic Asset Loan Factory. TALF, the U.S. government's effort to boost consumer lending, finally launches next week. The program - officially the Term Asset-Backed-Securities Loan Facility - is targeted at restarting the market banks use to fund credit-card, auto and other consumer loans. But some worry TALF could create even more risky bonds that our nation's wobbly financial firms don't want and can't sell - a perverse unintended consequence of a well-intended program...
...Stick with the Program Early action, however, is just the beginning. Japanese policymakers have learned the hard way that it takes years to leach toxic assets out of a financial system and restore confidence so that consumers shop rather than stash their money in safe-deposit boxes. While domestic demand remains sluggish, government spending has to take up the slack and keep at it. In Japan, a recovery was aborted in the late 1990s when, at the first sight of green shoots, the government raised taxes. President Barack Obama is committed to reducing this year's federal budget deficit...
...What price might Treasury offer? Treasury Secretary Timothy Geithner is doing a "stress test" of the banks to determine how much capital they need to survive. Whatever number that ends up being might be a good price for the toxic assets. "We want to get the assets off our books," says Talbott...
...save the banks, government officials might see a change to mark-to-market rules as the most promising way remaining to bolster the banks and their bottom lines. What's more, relaxing the accounting requirement might make it easier for Treasury to iron out a plan to remove toxic assets from bank balance sheets...
...banks are allowed to market the toxic assets back up to their original precrunch prices or close to them, that would give the Obama Administration political cover: Treasury can come in and underbid the value of the toxic assets, declaring before Congress and the taxpayers that it is driving a hard bargain with the banks...