What is a bad bank? Understanding the good, the bad, and the ugly of the concept

We all own things we aren't proud of. That yellow Tshirt you bought on a whim but now rarely wear, or that specialized grating tool that sits in your kitchen that you've never used. What if someone agrees to buy those back from you, at a discount! If you're like most people, you would probably be quite happy with the deal. You get rid of things you didn't want anyway, and in place get cash, which you can now use to buy newer things - hopefully, better things.