Here's my understanding of the current TARP/TARPII/PPIP/etc plans:
The major "sick" banks won't lend to businesses, because their balance sheets are tied up with bad assets that they can't sell. The government will buy those assets, freeing up the major banks to loan again to businesses.I realize that is a gross simplification, but if the gist is right, it leads me to a simple observation:
Why doesn't the government just give long-term loans to the healthy banks (building up their balance sheets) so that they can loan to businesses? Why are the major "sick" banks the only vehicle to provide credit to businesses?