Addictions

Banks Return to Toxic Assets

Gov’t program makes them profitable again.

The government intervened to help banks kick their toxic-asset habit, but has it actually made things worse? Bloomberg writes that, since the government created the Public-Private Investment Program to help banks sell off their most toxic debts, the banks have actually increased their holdings of such debts, like mortgage-backed securities, because the government has made the market so profitable. Six of the seven largest banks, including Bank of America and Citigroup, have increased their holdings of residential mortgage-backed securities. Bank of America added the most of such debts to its trading book, with an increase of $945 million. “It’s absolutely ridiculous,” says the managing director of one consulting firm. “Some of them created this mess, and they are making a killing undoing it.”