A key problem in getting distressed assets off the books of existing institutions is establishing a price, obviously. We know that the Obama administration wants the market to set the price. We also know that if the price is too low, banks would prefer to hold to maturity, so they will not play. If it is too high, it will be seen as unfair to taxpayers.
There are hints that the government proposal will include what we might view as a 'put.' This might be overt, guaranteeing the assets at a certain level. More likely it will be concealed, perhaps through partial government financing that is non-recourse.
The friendly financing increases the value of the distressed securities for the private bidders. It is not an out-of-pocket cost for the government, allowing
the illusion of a lower level of responsibility. The resulting price will be artificially inflated because it conveniently neglects the imbedded put. Just a
hunch....maybe all wrong...