For all the talk of the necessity of the Henry Paulson-proposed bailout plan, there are lots of questions about it, including this very big one: Will it actually worsen the crisis? It assumes, to some degree, that assets are being valued at something close to fair value on the books. But that may not be the case. There may be some carry assets at inflated values, says Peter Orszag, director of the Congressional Budget Office. He explained to the Washington Post that if they sell to an RTC-like entity, that will force a valuation on to the books. Banks that have hidden toxic assets would then be forced to record a loss, which could wreak havoc with some banks. One could argue that many banks have taken some big hits already. But no one would be foolish enough to say all bonds are being carried at fair value.

For more:
- here's the Washington Post article

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