Bailed-out banks to buy toxic assets

Stocks are fluctuating in Friday trading after investors looked past new unemployment data that showed unemployment jumped in March to its highest rate since 1983.

At 2:37 pm ET, the Russell 2000 (NYSE:IWM) is up 0.92% at 454.33, while the Dow is up 0.41% at 8,010.98 and the S&P 500 is up 0.79% at 841.

This morning oil prices rose above $53 a barrel, extending a rally fueled by market optimism that crude demand may rebound if the U.S. economic downturn bottoms out soon, while it was reported that U.S. banks that have received government aid are considering buying toxic assets to be sold by rivals under the Treasury's $1,000 billion plan to revive the financial system.

Small caps on the move today include Zale Corporation (NYSE:ZLC), which is up a whopping 51% after AM Best affirmed the jeweler’s financial strength rating.

******There's a lot going on today. The unemployment rate "surprisingly" hit 8.5%. President Obama knocked 'em dead at the G-20 meetings.

But the headline that caught my eye was "Bailed-out banks may buy toxic assets."
Believe it or not, Citigroup (NYSE:C), Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS) and JP Morgan (NYSE:JPM), are considering using the Public-Private Investment Program to buy toxic assets from other banks, according to the Financial Times.

The Public-Private Investment Program is designed to encourage private investors to put money to work buying toxic assets from distressed banks. The Treasury and the Fed have offered loans to make the purchases less risky for the buyer. In essence, all a buyer has to do is put up a token amount of cash and the government will fund the rest. 
Yes, the plan reduces risk to the point that it's kind of like a free money giveaway - the taxpayer takes the risk, the subsidized investor makes the profit, assuming there is one. 

Personally, I'm not happy about the plan. But something has to be done to get the market for these toxic assets moving. Right now, there's a huge spread between the banks asking price and investors' bid. And nobody's budging. Throw in . . .

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