Bad loans made by banks. Financial "instruments" whose value is dubious. sub-prime mortgages in foreclosure. Hard to say exactly. Basically, investments made by financial institutions which remain on their books, but which cannot be accurately valued as to their financial worth. Thus, they are "toxic" because they cannot be written off, but also cannot be considered to have their book value. Someone should make an analogy with quantum physics--Toxic assets are the Shroedinger's Cats of Banks?