'Bad Bank' Plan Has Pitfalls, Analysts Say

As support builds on Wall Street and Capitol Hill for a "bad bank" that would help financial institutions free their balance sheets of illiquid assets, two prominent analysts on Thursday noted significant stumbling blocks in the way of the plan's success.

Oppenheimer analyst Meredith Whitney and FBR Capital Markets analysts led by Paul Miller questioned the impact that the bad bank concept that helped buoy financial stocks on Wednesday may have on the earnings power of financial companies.

The Obama administration is formulating the next phase of the federal government's response to the banking crisis and have expressed a willingness to consider using the remaining $350 million of the $700 billion Troubled Asset Relief Program, or TARP -- and possibly much more -- to buy up bad assets weighing down the banks. ...