Despite pronouncements that a financial meltdown has been averted, a recent report from the Congressional Oversight Panel observed that toxic assets continue to pose a threat, especially for smaller banks that face mounting losses on their commercial real estate loan portfolios.

But neither attempt by the federal government to address the problem of toxic loans - the Troubled Asset Relief Program and the Legacy Loans Program (which is part of the Public-Private Investment Program) - ever got off the ground. Despite larger banks' recent success at raising capital, a real and sustainable banking recovery is not going to happen anytime soon without a politically palatable and bank-tolerant emetic to purge the financial system of toxicity. The COP report, citing uncertainty about whether the troubled assets remaining at banks can again become a trigger for instability, called on the Treasury Department to adopt an effective program to purge these assets from bank balance sheets.

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