If banks sold their assets to the Treasury at current market prices most banks would be insolvent. Banks don't have to mark loans to market so they are currently solvent. Bernanke suggested paying above market prices for the loans in order to ensure that banks remain solvent. I agree with that premise but believe the banks should be forced to issue equity to the government to make up for the difference between "market" prices and the value they are holding the loans on their books, plus a penalty. Look at what Buffett was able to get from Goldman. Shouldn't the taxpayer's get the same? Do we not work for our money?
I think the idea of allowing defaulted home buyer's to modify loans would be a disaster. It would encourage more people to default on their loans in order to get a modification. This would worsen the problem. Why does someone who put nothing down on their house deserve a break? What did they lose?