I can't decide whether the notion of a stock-injection bailout plan is a good idea or not. It appeals to the part of me that likes a punishment paradigm for solving problems like this.
One problem is that it may prevent troubled companies from seeking help. Another is that it gives a company two values: one with distressed assets, another without: pre-bailout and post-bailout prices, if you will.
At first glance it's a better solution than just having the Treasury just guarantee it will purchase any and all distressed assets, since that effectively gives investment banks a reserve fund; they'll be able, for the life of the bailout, to gamble with taxpayer money and keep the proceeds.
Another problem is that it's possible for a company to be worthless, net of distressed assets, in which case the government wouldn't get good value for its money either way.
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