The Treasury's Public-Private Investment Partnership, meant to provide private investors with public financing to purchase toxic securities, is showing signs of life. The private investor participants have so far raised $1.13 billion in capital to use in the program. This is progress, but only mild success. Moreover, the real test still awaits: will anyone want to sell their bad assets?

First, this start is really a very modest. The Wall Street Journal notes:

The $1.13 billion raised by these fund managers so far is a small drop in the $1.64 trillion market for mortgage-backed securities that are backed by nongovernment agency guaranteed mortgage loans. The commercial-mortgage-backed securities market is likewise large compared with the current PPIP program, at about $700 billion.



To be fair, some of those assets are much more toxic than others. But if you do consider that entire $2.32 trillion sum, the $4.52 billion in purchasing power that the $1.13 billion raised amounts to will only result in 0.19% of those securities held by the market. That would hardly solve the problem.

But it is progress. Yet, it's also not particularly surprising that investors are interested in using extremely cheap government financing to purchase assets that will likely have to be sold well below their hold-to-maturity values. The real question is whether or not banks and other investors will want to sell their securities through this program. Three important points would still indicate otherwise.

First, now that banks are much healthier than they were even eight months ago, they are probably far less interested in selling these assets at deep discounts. Many have managed to acquire equity from private investors, despite their bad assets. As a result, there isn't any dire need to get rid of this poison anymore: investors don't seem to mind as much that it still plagues their balance sheets.

Second, the prices investor participants might be interested in acquiring the assets for might not be in the same range as prices for which those with the assets are willing to sell. Despite being healthier, the last thing these banks want to do is declare huge losses caused by recognizing sales of these assets. Fresh billion dollar losses could create renewed skepticism of their health.

Finally, if these assets do begin being sold, that could create a mark-to-market fiasco. As soon as some banks begin selling their assets, others will have to mark the similar assets on their balance sheet to the market values sold accordingly. That could cause cascading losses across the industry if these assets are sold for less than where they're currently valued by banks. If banks recognize this danger, they might also stay away from the program.

We want to hear what you think about this article. Submit a letter to the editor or write to letters@theatlantic.com.