When Hank Paulson handed over $125 billion to America's largest banks, he neglected to force them to reveal and write down their bad assets, and thus kill the ones which are irredeemably bankrupt and should die. Paulson also took non-voting stock, and so we don't have the ability to dictate bank behavior that owners would normally have.

Thus, even though we were supposedly handing over our money in order to get credit markets working again, the banks were obviously going to just hoard the money.

Obviously:

The deepening red ink underscores a crucial question about the government’s plan: Will lenders deploy their new-found capital quickly, as the Treasury hopes, and unlock the flow of credit through the economy? Or will they hoard the money to protect themselves? John A. Thain, the chief executive of Merrill Lynch, said on Thursday that banks were unlikely to act swiftly. Executives at other banks privately expressed a similar view.

“We will have the opportunity to redeploy that,” Mr. Thain said of the new capital on a telephone call with analysts. “But at least for the next quarter, it’s just going to be a cushion."...

But Treasury Secretary Henry M. Paulson Jr. is urging them to use their new capital soon. On Monday, Mr. Paulson unveiled plans to provide $125 billion to nine banks on terms that were more favorable than they would have received in the marketplace. The government, however, has offered no written requirements about how or when the banks must use the money.

“There is no express statutory requirement that says you must make this amount of loans,” said John C. Dugan, the comptroller of the currency. “But the economics work so that it is in their interest to do so.”

Mr. Dugan added that he would not examine how the banks used the money, but he said their actions would “be open to the court of public opinion.”

Yes, the "court of public opinion." Normally we might want to use real courts, but Hank Paulson has made certain that's impossible.