'Toxic' Assets Still Lurking at Banks

Accounting tricks may hidden the problem from plain view, but out of sight, out of mind approach only hides the problem behind layers of complexity. Trillions of dollars of toxic assets still exist and have no market. This largely explains why the Fed refuses to throttled back on it's liquidity programs despite the illusion of an economic recovery.

During the financial crisis, investors fretted over "toxic," hard-to-value assets that banks were carrying. Those fears have faded as bank profits have rebounded, loan delinquencies have declined, and bank stocks have soared 25% in the past five months.

But banks still hold plenty of the bad assets that once spooked investors: mortgage-backed securities, collateralized debt obligations and other risky instruments. Their potential impact concerns some accounting and banking observers.

Source: online.wsj.com