Adrian Wojnarowski of Yahoo! Sports reports that the Houston Rockets and New York Knicks are working on a deal to send Tracy McGrady to New York. The Washington Wizards would facilitate the three-team deal by shipping Caron Butler and Brendan Haywood to Houston while receiving Al Harrington from New York. Wojnarowski writes, the Wizards "would still need another player, as well as a draft pick and cash to make this a workable scenario, sources said."
UPDATE, by Mike: Here's a trade that would work financially and that I would consider, with Houston also throwing in a first-round pick and whatever minimum salary guys needed to maintain roster balance.