Apparently, Secretary Geithner has discovered that it is “hard” for the government to “set” the “value” of toxic assets. (Pardon my quotation marks.)
I’m sure he’s right, given that he’s simultaneously trying to:
1. Set the value so that the banks look solvent.
2. Set the value so that the assets can be sold without bank balance sheets deteriorating.
The problem, of course, is that establishing (2) requires that we value the
toxic legacy assets according to what they can actually be sold for. Something economists like to call the market price. But, (1) requires that we value the toxic legacy assets above the fair market prices. No force of will or “clever” policy can change that fact.
So, it seems that Geithner has realized that a task that is logically impossible is “difficult”. At least his understanding is moving in the right direction.