Two economics professors say that the toxic assets are correctly valued by the market.

Business Insider reports "The government's official view that toxic assets are incorrectly priced due to illiquidity "fire sales" is wrong, a new study by Harvard and Princeton finance professors suggests." Harvard's Joshua Coval and Erik Stafford and Princeton's Jakub Jurek conclude "that the low prices of toxic assets actually reflect the fundamentals, rather than being driven by an illiquidity discount."

This suggests that many of the financial institutions may be insolvent rather than illiquid as the government has been indicating. This means that "the government cannot save the banks by improving liquidity or changing mark to market rules because the problem isn't illiquidity or accounting. The problem is that highly leveraged financial firms own assets that are worth far less than they thought they would be, and the firms are insolvent as a result."