Setting Prices for Distressed Assets

So, apparently you and I as US taxpayers are going to be buying some distressed assets through our friends at the Treasury Department. What price should we pay? The supposed problem right now is that no one wants to buy these assets, so maybe zero is the right number. The counter argument is that they have some value. So, what do we do?

In a Slate column, Steven Landsburg (economist and author) proposes that we use a Bils-Kremer auction.

Here's (roughly) how a "Bils-Kremer" auction would work: First, put 10 similar distressed assets (such as a series of collateralized debt obligations) up for auction. At the close of the auction, the Treasury pays the winning bids for nine of these properties. The 10th property (chosen randomly) gets sold to the winning bidder.