From what I gather, banks and other financial companies are on pins and needles about what the government will do with the second half of the $700 billion bailout. The Treasury postponing that announcement until Tuesday is a pretty shrewd move by the Obama people. The President seems to be saying: you’ll get the details on that when we pass the stimulus package. Of course, it could be that the Treasury hasn’t made its final decisions either.

But the idea seems to be that the government will create a “bad” bank in partnership with the private sector. This is all about trying to value the banks’ toxic assets, as the Wall Street Journal points out this morning:

The Treasury’s working theory for the government/private-sector partnership is that investors wouldn’t overpay, because if they did, they’d stand to lose money; but they also wouldn’t underpay, since the selling banks wouldn’t be willing to part with their assets too cheaply.

The importance of this valuation process cannot be overestimated. I met a guy in the commercial real estate biz this weekend who said, “How these assets are valued will determine whether or not we do business this year.”