Certainly there are situations in which capital injections are necessary. In Britain, for example, there are only a handful of banks that matter, and those had their capital so depleted that there was no choice but to pour money into them, on onerous terms and with lots of strings attached. And certainly, as with PNC's purchase of National City, a dose of government capital can grease the takeover of a weak bank that might have otherwise failed and required government intervention.
But making modest investments in dozens of banks, whether they needed it or not, produces little for the public beyond the small profit for the Treasury. What it does do, however, is open the door for every politician and populist to second-guess every decision and expenditure the banks make, based on the false assumption that everything they do is with "our money."
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