...s. The Treasury would take bad loans off the hands of troubled banks, perhaps swapping them for government bonds. The toxic assets, blamed for poisoning the financial system, would be parked in a stat
e vehicle or “bad bank” that would manage them and attempt to dispose of them while “detoxifying” the main-stream banking system.
The idea would mirror the initial proposal by Henry Paulson, the
US Treasury Secretary, to underpin the American banking system by buying up toxic assets. The idea was abandoned, ironically, when Mr Paulson decided to follow Britain’s plan of injecting cash direct...