This objective could be accomplished in several ways, including by directly purchasing troubled assets, by setting up and capitalizing special banks that would purchase assets from financial institutions in exchange for cash and shares of capital in the special bank, or by making available to banks insurance that would pay off under very adverse conditions.
Each approach could build on the infrastructure that the Treasury developed when it was planning to purchase troubled assets directly. Moreover, as I noted earlier, purchases that include residential mortgages could be combined with steps to restructure some mortgages as needed to avert preventable foreclosures.