The idea for what's left of the $700-billion (U.S.) in bailout cash is to create one or more government-run “aggregators” that buy up bad loans and investments that are choking the banking system. It's worth trying, because nothing else has worked, some economy watchers say. And it will not be any more costly to the taxpayer than the so far unsuccessful strategy of injecting capital directly into major banks.
“When you order dirt to put in a hole and you empty the dump truck and the hole still isn't full, you've got to order another truck,” said Robert Brusca, head of FAO Economics in New York. “That's basically the problem.”
The drastic retooling of the rescue plan comes amid fresh evidence that officials around the world seriously underestimated how paralyzed even relatively healthy banks would become from the toxic waste spread throughout the financial system.
In Britain, officials have similarly launched another round of emergency relief after earlier capital infusions failed to spur lending, and public confidence in the banking system reached new lows. The government yesterday increased its stake in Royal Bank of Scotland to 70 per cent after the bank revealed that its losses for last year may total a staggering £28-billion ($41.3-billion), which would be a record for a British company."
Facing credit crisis, Obama team revives Bad Bank strategy
I especially liked the dump truck analogy. I wonder if those are Tonka trucks?