Why Banks won't discount the price of their REO

I was just given the best explanation of why banks won't discount the price to market of their REO by my friend Victor.

If the banks sell their REO inventory at today's market price, which is far less than the loan the banks made, the banks would have to post the loss on their books and become insolvent. What a Catch-22!

I also learned that many of these banks' employees literally work from week-to-week. Officials only come in on Friday afternoon to close a bank down!

So why don't banks discount the price of their REO inventory to sell? So that the employees can keep their jobs as long as possible. And they hope: for the government to bail them out, take them over and keep them on as employees or that the economy improves fast enough to improve the value of their bank's "toxic assets" and the bank won't get taken over & closed.

Hard to blame them. However it seems that politicians want to keep pushing the problem to the future rather than addressing it. Well that's politics.

I keep thinking Resolution Trust Corp.; why won't our Congress?