Banks buying bad assets with taxpayer money as bailout confusion grows


The formula is simple, and may be insidious in the eyes of many taxpayers and Congressmen. Big banks will buy toxic asset from other big banks under the government's new plan to get bad assets off the balance sheets of financial firms. Once the assets have been sold, banks should be able to avoid raising more money and be more inclined to lend.

The plan has the benefit of making enough sense that it just might work, especially if private capital joins the government in an effort to cleanse the banks of their most troubled paper. But now word has come out that some banks that got TARP money will try to profit from the new toxic asset buying system. Looked at simply, they would be using public TARP money to make potential profits from a second federal program that provides loans to buy toxic assets.