Bernanke Bets 'Bad Banks' Will Help

"Toxic waste" is back on the menu.

When the $700 bailout first passed, the idea was to purchase troubled assets from banks to help them gain solid footing. With those pesky hard-to-value assets off the books, the banks would be stronger.

However, lawmakers took a different route and injected cash into the banks by taking equity stakes. Was it enough to help? It seems like the answer is no. Even economic stimulus won't do the trick, according to Fed Chairman Ben Bernanke.

Bernanke proposes that the government buy or guarantee toxic waste, perhaps by setting up 'bad banks' as waste dumps. The bad banks would trade toxic waste for an equity interest in the banks that unload bad assets.

Further reading:

• Mortgage Crisis Causes
• Push to Buy Toxic Debt Gets New Life