The plan announced this week by the US Treasury secretary Tim Geithner is designed to clear away a large load of so-called “toxic assets” clogging up America’s financial system. But what are these assets? And how will the plan work?

Normal loans go bad every time the economy enters a recession, as companies’ profits fall and mortgage-holders lose their jobs. But on top of that familiar problem, banks and other financial institutions have created complex financial securities, called derivatives, so blindingly complicated that even the people creating them didn’t really understand them.