WASHINGTON — Though the Obama administration released new details Monday about its plan to buy toxic assets, critical questions remain unanswered, and they likely will not be cleared up until the plan begins operation.

Chief among them were whether investors, through an auction process run by the Federal Deposit Insurance Corp., would offer high enough bids to entice bankers to sell illiquid assets and whether federal regulators would force them to participate if they balked at selling.

"My concern is that the willing buyer and the willing seller may still be too far apart to create a trade," said Douglas Elliott, a fellow at the Brookings Institution.

FDIC Chairman Sheila Bair conceded that possibility, acknowledging nothing could guarantee the process would produce a good deal for the investor, the bank and the government.

"There is always that risk," she said in a conference call with reporters. "Markets will do what markets will do, but I think this structure has a better chance than any that I've seen to provide that magic price where buyer and seller are willing to meet. But we won't find out until we get it running and see what happens."

When asked if regulators might push bankers to accept a price offered through the auction process, Bair responded that it would be a "consultative process with supervisors."

Industry observers argued that the banking agencies would penalize banks that did not take the opportunity to shed their most troublesome assets.

"If the banks refuse to sell, I think you'll see an increased pressure on the part of the regulators and an increased Camels rating going on to the watch list," said Thomas Barrack Jr., the founder, chairman and chief executive of Colony Capital LLC. "The regulators will have no other alternative to start shutting down more banks."

Mark Zandi, chief economist and co-founder of Moody's Economy.com, Inc., said pressure from the Treasury Department and the results of "stress tests" on the banks could force many to participate.

"The stress tests might push the banks to lower their price, and given the very lucrative financing for investors, that will get them to raise their price, and we'll find a nice middle ground here," he said. "So I'm hopeful that the Treasury is pushing both the buyer and the seller to some middle ground, and that will get the auction to work reasonably well."

Other questions left unresolved Monday include how quickly the plan will be implemented, what loans are eligible for the auction and whether the entire process is too bureaucratic.

The Treasury split its program to address troubled assets into two parts. Under one, the FDIC would host auctions designed to let banks sell pools of residential and commercial real estate loans. Under the other, the Federal Reserve Board would accept legacy securities as collateral as part of its Term Asset-Backed Securities Facility (See related story).

The Treasury plans to partner with up to five asset managers to help it manage the extended Talf program, which will now accept lower-rated securities. The department would use up to $100 billion from the Troubled Asset Relief Program to leverage $500 billion of toxic asset purchases. Treasury and Fed officials said the program could be expanded to reach $1 trillion.

It was unclear when either program would be up and running. The FDIC said it plans to release more details on its auction process shortly and would put it out for public comment.

Under that program, banks would identify loans they wish to sell and would seek approval from their primary federal regulator to offer them as part of the auction. If the FDIC agreed, it would then conduct an auction of private investors, which could include private-equity firms, insurance companies, pension plans or even individual investors.

Several bankers said they are waiting for more details, but they seemed interested.

"The whole issue with buying the troubled assets is the pricing issue," said Rick Simas, the interim president of Pacific State Bancorp. in Stockton, Calif. "From the get go, that has been the issue for this thing. Don't want to sell them too cheap, but too expensive, and nobody is going to buy it."

At the end of December nonperforming loans at the $421 million-asset Pacific State amounted to 7.7% of gross loans, compared with 0.14% a year earlier.

"We don't have a lot of loans that are bad, but a couple that we have are on the large side, and it would be very helpful to get rid of," he said, since the bad loans were in the commercial real estate portfolio.

Some observers said the program may be too slow and cumbersome.

"They're creating a huge administrative problem with all these different plans, different rules," said L. William Seidman, a former FDIC chairman and now a CNBC commentator. "It's one thing to say there's a plan, but you've got to have rules for all of them. I think it's going to be excessively bureaucratic and expensive. When you get right down to it, 90% of all the plans could be made into one."

Another potential headache is one presented by Congress. Though several private-equity firms, such as BlackRock Inc. and Pacific Investment Management Co., said they are willing to participate in the program, many fear that lawmakers may put compensation or other restrictions on any entity that participates in a government program. Last week three bills were gaining traction to strip away bonuses from Tarp participants. "That's going to be one of the biggest problems that this program is going to be faced with," said Bob Clarke, a senior partner at Bracewell & Giuliani LLP and former comptroller of the currency. "Given the way Congress has been behaving, I'm not sure there are a lot of investors wanting to participate with the government as a partner."

Treasury Secretary Timothy Geithner said the Obama administration would work with Congress on its executive compensation measures to strike the right balance.

"The great risk we face now is that, after a long period of irresponsibility and excessive risk-taking, that the system will not take enough risk now," he said. "And for these programs to work, investors have to be prepared to take risk. And for them to take risk, they have to be more confident than they are today that there's going to be a clear set of rules of the game applied consistently and enforced fairly."

The Treasury also said in its announcement unveiling the program that no private investors would be subject to compensation restrictions. But many wondered if that would be enough.

"Look what Congress is doing to AIG. … The fact is Congress has shown it is willing to run roughshod over the Constitution to punish a disfavorable group. I don't know what percentage of participation it will deter, but I know a lot are hesitant," said Ed Gainor, a partner at a partner at McKee Nelson LLP.

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