The crisis in the banking sector will only be resolved when the toxic assets that caused the problem are entirely removed from the system. This may be as self-evident as a man in possession of a good fortune being in want of a wife, but governments and regulators alike have spent a lot of time and money trying to convince themselves otherwise.
The latest initiatives announced by the UK Treasury are a step in the right direction in that they propose to start buying assets. But they are only proposing to buy good assets; bad ones will just be insured.
The initiative involves an Asset Protection Scheme under which the Treasury will insure institutions against future credit losses on defined assets...
