Q&A / Toxic Assets:
Bad investments turn into a paper time bomb

Toxic assets are blamed for helping spark the biggest financial crisis since the Great Depression. And just last week, the Federal Reserve announced it would buy $750 billion worth of toxic assets in the latest big-budget attempt to jump-start the economy.

 …  Q: Why is the Fed spending $750 billion to buy mortgage-backed securities?
A: In short, they're trying to heal the big financial firms. The theory is that taking the toxic assets off of the companies' balance sheets will free them up to make new loans. It's not clear how quickly the banks will respond, but they will be in a better position to restore the battered credit markets, said Don Sabbarese: director of the Econometric Center at Kennesaw State University.

(Also: Why is government buying more toxic assets?)