First, Treasury is announcing a voluntary capital purchase program. A broad array of financial institutions is eligible to participate in this program by selling preferred shares to the U.S. government on attractive terms that protect the taxpayer. Second, after receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Paulson signed the systemic risk exception to the FDIC Act, enabling the FDIC to temporarily guarantee the senior debt of all FDIC-insured institutions and their holding companies, as well as deposits in non-interest bearing deposit transaction accounts. Regulators will implement an enhanced supervisory framework to assure appropriate use of this new guarantee.
Third, to further increase access to funding for businesses in all sectors of our economy, the Federal Reserve has announced further details of its Commercial Paper Funding Facility (CPFF) program, which provides a broad backstop for the commercial paper market. Beginning October 27, the CPFF will fund purchases of commercial paper of 3 month maturity from high-quality issuers.
First, the plan is hardly "voluntary":
Some of the big banks were unhappy about the government taking equity stakes, but acquiesced under pressure from Treasury Secretary Henry Paulson in a meeting Monday. During the financial crisis, the government has steadily increased its involvement in financial markets, culminating with a move that rivals the breadth of the government's response to the Great Depression. It intertwines the banking sector with the federal government for years to come and gives taxpayers a direct stake in the future of American finance, including any possible losses.
The Treasury does not want to be seen as playing favorites. Hence, everybody gets to play.
I explain the inner-working of these programs in this article. The short version is I think this will stop the bleeding pretty effectively.