The Paulson Plan hopes to solve the banking crisis with, among other things, a Troubled Assets Relief Program (TARP). The troubled assets were presumably going to be bad mortgages, mortgage related instruments, and other debt-related products. The government would take these 'toxic waste' items off the banks' hands, and replace them with more useful assets.
Now, the banks themselves may be troubled assets. The Treasury may take an ownership stake in banks to help solve the problem. This comes as a surprise to many, who didn't think that banks would fit the definition of troubled assets. However, it appears that the lawmakers approved such language, and the Treasury is moving forward.
Depending on who you ask, this expanded definition of 'troubled assets' is brilliant or disastrous. Some see it as a step towards nationalizing the banks, and some want the Treasury do as much as possible to stop the bleeding.
Further reading:
Troubled assets — trouble is to know whether these are short, medium or long term assets.
Loans the govt make should be refundable surely since they are to help the banks liquidity(ability to repay inter bank loans.)
Taking a stake in the capital of banks I suspect is an astute measure to both gain closer control and also avoid a lot of unnecessary legislation.