Investors ready, but banks continue to balk at toxic asset plan


The Treasury Department has over 100 applications from would-be investment managers who want to buy toxic bank assets under the Public-Private Investment Program (PPIP). While that sounds promising for the success of the plan, banks actually don't want to sell their assets at the price investors are willing to pay. Also, some major investment groups just don't want to get involved in another government plan for fear they will be demonized for making big profits on the toxic assets they buy.

Yet these toxic assets continue to drain the health of big and small banks as the losses build and constrict their ability to lend. While big banks have raised $65 billion in new investor capital, smaller banks can't tap into that source of funds to prop up their balance sheets. Hundreds of smaller banks are sitting on commercial loans that have gone bad or soon will. But even the smaller banks don't want to sell the assets at bargain basement prices because it will hurt their balance sheets and dent their capital cushions.