Wall Street banks are working on plans to separate troubled assets from the rest of their businesses in an effort to ring-fence problems and restore investors’ confidence in the financial sector. A number of US firms are looking to follow the example set by UBS, which this week put securities linked to US mortgages into a separate subsidiary with a view to eventually reducing its exposure to the troubled assets, which have been responsible for more than $30bn of losses so far. The Wall Street banks’ plans, which are yet to be finalised, would enable banks to move at least some troubled assets off their balance sheets by selling large stakes in the funds to outside investors. Lehman Brothers, which has been forced to deny rumours about its financial health over the past few weeks, is believed to be one of the banks considering a spin-off, or sale, of some of its assets.

... and gets mildly angry:

this works only if the price to which you have marked the assets is lower than a third party is willing to pay. Otherwise, you wind up worse off... Or just as bad, word gets out that you shopped your little nuclear waste subsidiary, but didn't like the offers. Now guess what that will do to your stock price, your counterparties' confidence, and CDS prices on your debt. You were better off having everyone believe, or pretend they believed, that your write-offs put all your problems behind you.
So this does not appear a bona fide notion to unload this stuff onto third parties... This effort, then, despite the brave talk (and perhaps a bit of self-delusion), is preparation to somehow dump these toxic assets on the laps of the Powers That Be.

It's a big gamble to take - but it seems to be the only way the banks will manage to shift this nuclear waste without having to make yet more writedowns and completely destroy their investor base.