One of the aspects of the Paulson bailout bill that was not clear until today is that the Treasury has no intention of running a true action for the toxic assets on bank balance sheets. An auction would tend to set very low prices on the current value of mortgage-backed paper. Based on the few transactions which have taken place in the past, this might be as low as 30 cents on a dollar. It has been widely assumed that banks would need to take large write-downs on the devalued assets, creating the need for them to raise more capital...
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