It is a remarkable shift for the Administration, which asrecently as mid September had rejected the option ofnationalization or even partial nationalization of a bank. More tothe point, the new development also throws into question the fateof the debt repurchase plan that was--and technically still is--thecrux of the $700-billion Emergency Economic Stabilization Act of2008 passed at thebeginning of October.

It is unclear whether the plan to buy toxic debt will no longerbe a centerpiece of the rescue plan now that Treasury has alsodecided it will buy shares of these banks, Peter Cohan, a principalof Peter Cohan & Assoc., tells GlobeSt.com. "Frankly I couldn'tbe happier if that plan [to buy toxic debt] becomes DOA. There areso many reasons why it will not work: it will be hard to set anappropriate price, especially for securities that have tranchesrated at different risks. If Treasury sets a price that is higherthan the value on the bank's book then the bank realizes a profit,which isn't right. If the price is set under the book value, thebank would have to take a write-off, which would then have tooffset a capital loss--which of course the banks couldn't do. Sothey would turn into zombie banks for all intents."

Cohan doesn't think the Administration will publicly jettisonthe plan to buy debt. "I think it will just focus on the capitalinjection plan and if that works they will quietly forget about theother."