This should be the task primarily of the shareholders of the weaker banks, who should refrain from taking dividends or should inject more capital if needed. In some cases, government investment in bank equity may also be necessary. Coming from Finland, I understand very well the political problems involved in cleaning up the banking system.
Under the plan, the Federal Reserve would extend up to $ billion in credit to special purpose vehicles (SPV) that would repay the obligation from the net cash flows of identified blocks of life insurance policies previously issued by certain AIG domestic life insurance subsidiaries.