What Happended to Toxic Assets?

This is the most hectic semester I have had since arriving at Hope College. One result is that the quantity of posts to my blog is down. I will try to improve after spring break, during which I will be an expert witness and not catching up on my classes. I feel as if I am following the Japanese auto model--"just-in-time" teaching. I don't recomment it.

On another note. Sen. Dodd has put forward a plan for financial regulation. It made me wonder what ever happened to the toxic assets we heard so much about a year or more ago? A toxic asset is not necessarily a bad asset or a valueless asset. A toxic asset is an asset for which the value is unknown. It may be that the banks and other market participants now know the value of the assets, have written off the bad ones and are comfortable with the good ones. I don't know and haven't heard anything about it.

Another question I have concerns the failure of banks to extend loans. I understand that the number of loans is down. But there could be two reasons--people with a lot of debt already are not applying for loans, or people are applying but banks are turning them down. Actually, it is likely both are partially correct. But banks are more likely to be cautious if they still have toxic assets on their balance sheets, which brings me back to my first question. I am hopeful that recovery will build but am still concerned about some weaknesses that may still exist in the economy.