When I was a kid, 'toxic' assets were not assets at all; they were called 'liabilities.' That's why asset and liability columns exist on these things called 'spreadsheets.' But I am neither a politician nor a banker so I have poor grasp of things I know nothing about. Much like this Timothy Geithner guy.But apparently toxic assets do exist because banks around the world are being dragged down by them. Who would have thought that mortgage-backed securities based on a housing bubble fueled by people who couldn't afford their homes would ever be a problem? Well, me, but I was told I hated poor people and minorities for daring to ask.Only linguists and people like me who don't understand economic stupidity think a toxic asset is a contradiction in terms. W. Bruce Johnson, professor of accounting in the University of Iowa's Tippie College of Business, says it's pretty accurate, even if it doesn't exist in accounting terms."I don't know if that was coined by a journalist or a politician or someone who works in finance, but in accounting, we don't call anything a toxic asset," he said.So maybe journalists are the toxic assets. Instead of talking about the thrill running down their leg over Barack Obama, they could have been asking why people with five figure incomes were acquiring seven figure homes.Nope, the toxic assets are definitely real estate, not the Fourth Estate . "These are securities that are real assets that generate cash flow for their owners," said Johnson. "They just don't generate as much cash flow as was priced into the security, so the value may be less than what the owner paid for it."So it's concern about what people paid, not what they can sell it for, that got us into trouble? Obviously one solution is to change some rules. Ridiculous mark to market requirements haven't helped. Mandating that loans go to the riskiest people, which we required again in the stimulus package, are as dumb as the policies that got us here.That's not to say you can't find bargains. I won't mention any names, but I know of one savvy investor who has almost broken even on his Citi stock, even though the original prices in said portfolio was near 50, because people tend to pile on unnecessarily when they worry about a company. But using the dumbest accounting rules of mortgage securities, all my money was gone in that stock - even though it wasn't. That's basically what mortgage holders are required to do - declare a loss on property they have not sold.100% of people aren't unemployed, the economy is not at a halt and not all assets are valueless, some just didn't have the 20% fat in the appraisal versus mortgage number banks used to require before they got Congressional hearings and newspaper articles for turning poor people down. The clean solution was to let some banks fail and make some people rent.Instead, the government got even more involved and investors got spooked that the dumb guys in charge of companies actually knew less about what their properties were really worth than the government and crazy accounting rules made the 'asset value' for some companies drop below the minimum capital requirements, putting those companies in violation of ... federal law, which then supposedly came to the rescue. Yes, the federal government decided overvalued assets had to be written down for banks even though they are sitting on $100 trillion (that's a 't') in unfunded Social Security obligations - over 6 times the size of our entire economy and that doesn't count Medicare, which is even worse. So the federal government is our toxic asset?It depends. Granted, the current administration seems to be running things like it's a video game with a save point where they can just start over if things go bad but at least they aren't doing it with expensive missiles, like the last one.Linguistics shall answer all."Impaired assets" is a better term than 'toxic'. "Any impaired asset has to be written down to some kind of realizable value as soon as it's declared impaired," Johnson said. "It's toxic in that it can lead to severe problems for the company that has to write it down to a value that's lower than what they expected."It means an asset that an owner can't sell for as much as they paid for it, like moldy grain sitting in an elevator.Errr, wouldn't that actually be toxic?"Moldy grain can still be used, it still has value," Johnson said. "But it doesn't have as much value as the owner paid the farmer for it when it wasn't moldy."So there you have it. Your finance stocks are like moldy grain. Didn't linguistics make you feel all better?Fortunately, unlike moldy grain, your stocks are likely to go up in value over time, provided we can stay disciplined enough to not run out with more mortgages for bad risk homeowners.Oops. Too late.