Much like the disastrous "new Coke" product launch of 1985, banks are asking Treasury Secretary Hank Paulson to bring back "TARP Classic," which would've invested in toxic mortgages rather than buying up stock of weak institutions to shore up balance sheets. From a CNNMoney.com story:
Two months after Treasury Secretary Henry Paulson pulled the plug on his plan to buy troubled mortgage assets, the financial industry is pushing the government to reconsider.
Since the Troubled Asset Relief Program, or TARP, took effect in October, Treasury has spent $267 billion buying preferred stock in financial institutions and auto companies, the agency said Thursday.
Paulson has said the capital infusions have stabilized the financial sector.
But the economy has taken a sharp turn for the worse in recent months, as credit has become less available and companies and consumers have cut back on their spending.
Meanwhile, U.S. banks continue to hold hundreds of billions of dollars of mortgage-backed securities that, if downgraded, could lead to another round of damaging writedowns.
That's why some observers want the Treasury to return to the premise of the original bailout and move toxic assets off banks' balance sheets...
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