The takeover of toxic assets by the government at zero cost and the corresponding write- down of assets will create transparency, avoid the high expense of pricing distressed assets, and will insure that shareholders are the first ones to bear the cost of failure. 27 The risk of moral hazard will also be effectively limited. A zero-cost acquisition is also justified based on the fact that the active management of the troubled assets is impaired by their complex structure. This approach will also keep the bad bank’s initial capital requirements at a minimum
