A well-known example of a bad bank was Grant Street National Bank, which was created in 1988 to house the bad assets of Mellon Bank. The financial crisis of 2008 revived interest in the bad bank solution, as managers at some of the world's largest institutions contemplated segregating their nonperforming assets into bad banks.
Federal Reserve Bank Chairman Ben Bernanke proposed the idea of using a government-run bad bank in the recession following the subprime mortgage meltdown in order to clean up private banks with high levels of problematic assets and allow them to start lending again. An alternate strategy considered was a guaranteed insurance plan that would keep the toxic assets on the banks' books but eliminate the banks' risk and pass the risk on to taxpayers.
The Treasury is creating a bad bank that will take on the toxic assets that have damaged the global banking system.
»The government has launched a bad bank to take over many of the 3.9 million credit card loans that are in arrears.