TARP was hobbled by political conditions (see "Agony Aunt" among old posts below) and by the contradition between buying assets at a generous margin above fire-sale and the idea of doing this by reverse auction. In any case these are novelties and the tried and tested solution from history has surely been nationalisation of banks!
Yesterday I listened to a US radio commentary on TARP which suggested that at the last moment language had been inserted into the legislation (by person or persons unknown) allowing the government the option of stock infusion rather than toxic asset purchase, In other words rather than face the conundrum of having to price unmarketable debt assets and their "toxic" risk projections, the tax payer (i.e. the Fed and US Treasury, who are rarely if ever referred to as the taxpayer at any other time?) could follow the Warren Buffet example, and enjoy the powers and benefits of preferential stock. If so, I imagine the lobbying weight (what's left of that) of the banks will be brought to bear to ensure this option will never be acknowledged publicly, still less exercised, unless of course some banks would like to be consolidated with others at government behest given that government surely does not want to be left with a shareholding of a bank that can't repay its TARP loan.
It is worthy of note that massive consolidation of Europe's banks (and of US regional and local banks) has been predicted for years as a necessary outcome of Basel II. But, it is also clear that big banking groups are dysfunctional and internalising to many transactions and supporting 'shadow-banking' that should be part of transparant regulated markets i.e. let's have no more dark pools and opaque or hidden crossing networks etc. There are those who want to strip the banks back to tradional banking only; no more or only limited proprietary trading. But, while the interbank credit squeeze may have nefarious causes allowing banks to prey on each other, it could also have arisen if less extreme even if all banks had stuck to traditonal banking. It is systemic and not just the fault of individual banks. Therefore, the idea of bringing capital markets fully on-exchange may be the better solution than haphazard bail-outs (see Creditowrthy Exchange Idea among 'older posts')