Buy stocks how? If they're going to purchase outstanding shares, that would artificially inflate the stock price, but wouldn't really get new capital into the banks' hands unless they sell new stocks at the inflated prices to the masses. This would cause dilution and bring prices back down despite being artificially inflated. If they buy new or preferred shares, that would also dilute the shares outstanding, which would bring the stock prices of these banks down further.
Seems like this measure is more to work on people's psychology than anything else. What happens when people figures that out? How well did buying bank stocks by the government work during the Great Depression? I'm not saying it won't work this time, but I'm genuinely curious. They've done this before, did it have any benefit the last time it was tried?
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