This is the way I read the proposed fix from Hank and Ben. LINK: http://www.marketwatch.com/news/sto...2210564344DF}&print=true&dist=printMidSection START QUOTE At issue is a proposal to create a new government entity that could take bad assets off of banks' and financial firms' balance sheets and sell them at auction, according to published reports. The online edition of The Wall Street Journal, citing unnamed sources, reported that Treasury officials have been studying the creation of such an entity for weeks, "but have been reluctant to ask Congress for such authority unless they were certain it could get approved." The Journal reported that the entity would not mirror the Resolution Trust Corp., which was created to address the savings and loan crisis in the 1980s. Rather than hold and sell the assets of failed banks as the RTC did, the new entity would "purchase assets at a steep discount from solvent financial institutions and then eventually sell them back into the market" through an auction, the Journal reported. END QUOTE So a govt clearing house or derivative exchange - Create a Govt controlled entity - Buy illiquid assest at deep discount (the major debate will be the price) - Auction them back to the market at best prices So the PRICE they buy the assets at DEEP discount must mean a huge hit for the bank having the assets taken off their balance sheet. This means a loss is still a loss. But the loss for the bank is hoped to be the full and final loss of this bear cycle, I assume. So (say) BAC sells its assets for $0.20 cents in the dollar to the govt entity and they hope to sell them for more or less. Who takes the profits or losses if the auction does not go well ??? Losses are still losses, and if the buyer buys this paper and it falls further, I guess more losses via the govt clearing house ??? sooooooo I assume my understanding is correct. GCH = Govt clearing house. Lets Say Wachovia have $100 of level 3 assets valued at $0.30c in their last 10g report. They sell this to Govt (after tough negotiations) for $0.25c and take a loss on this immediately of $0.05c. This paper is sold at auction via GCH for $0.10c, the GCH takes a loss of $0.15c ( ouch !) Surely the next time the Govt buys similar paper they would NOT pay more than 15c, surely, wouldnt you think ??? So if your first to sell to GCH you may get the best prices !!!