Not only can banks game the system by creating subsidiaries to bid up the price of their toxic assets; there is the very real and likely danger that they will collude to buy up each other's toxic assets. One hand washing the other, i.e. investment banks might scheme behind closed doors to clear each other's balance sheets of bad assets -- all funded by gov't debt and backed up with gov't guarantees.
The failing megabanks need a change in management and structured bankruptcy. The banks have shown they don't have the willpower or moral capacity to do what's needed.
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