The Achilles heel of the toxic asset plan?

March 25, 2009 | By Jim Kim

There's been a lot of talk of banks repaying TARP funds fairly soon. But that may not be possible for all banks. And any plans may have just been complicated by the Obama Administration's toxic asset plans. Which might result in some big losses at banks. Institutions that sell loans at a discount will have to take a writedown equal to the difference between the original value and the sale price, notes the Financial Times.

Those potential writedowns are making some executives very nervous, especially with the stress tests of big banks going on. If the losses are big enough, they would erode the banks' capital position, which would make it more likely they will fail the tests. Some may require yet another round of capital injections.

For more:
- here's the FT article