The Times reports:

“The IMF said in January that it expected the deterioration in US-originated assets to reach $2.2 trillion by the end of next year, but it is understood to be looking at raising that to $3.1 trillion in its next assessment of the global economy, due to be published on April 21. In addition, it is likely to boost that total by $900 billion for toxic assets originated in Europe and Asia.”

Only about $1 trillion of that have been written off so far.  Not to worry, though, Sheila Bair, Timothy Geithner and Ben Bernanke  have assured us that everything is under control and besides, the banks are going to hold all those assets to maturity and will not have to make any more write-downs …

The Treasury has released its new plan to remove toxic assets from banks.  It provides an example of how the plan would work for legacy assets.  Perhaps as we read it, we should mentally substitute a lower price than the 84 used in the example.  Then estimate best and worst cases for the resale value of the example asset (say) 4 or 5 years from now.  Here is the example:

Sample Investment Under the Legacy Loans Program

Step 1: If a bank has a pool of residential mortgages with $100 face value that it is seeking to divest, the bank would approach the FDIC.
Step 2: The FDIC would determine, according to the above process, that they would be willing to leverage the pool at a 6-to-1 debt-to-equity ratio.
Step 3: The pool would then be auctioned by the FDIC, with several private sector bidders submitting bids. The highest bid from the private sector – in this example, $84 – would be the winner and would form a Public-Private Investment Fund to purchase the pool of mortgages.
Step 4: Of this $84 purchase price, the FDIC would provide guarantees for $72 of financing, leaving $12 of equity.
Step 5: The Treasury would then provide 50% of the equity funding required on a side-by-side basis with the investor. In this example, Treasury would invest approximately $6, with the private investor contributing $6.
Step 6: The private investor would then manage the servicing of the asset pool and the timing of its disposition on an ongoing basis – using asset managers approved and subject to oversight by the FDIC.