Strong banks will benefit from the Treasury's new plan to buy to $1 trillion in troubled loans and securities; for weak banks, the plan may require them to face write-downs they can ill afford.

The Treasury Department's plan unveiled Monday puts leverage back into a market sucked dry by uncertainty and fear. Some analysts said the plan is another step to alleviating the financial crisis, though certainly not the last.

For banks that have enough capital to absorb more write-downs, and those that have already taken aggressive markets on the assets often described as toxic, the plan is yet another step toward solving the financial crisis, observers said. Those are likely the nation's largest banks, many of which have expressed cautious optimism about Treasury Secretary Timothy Geithner's blueprint.

But weak banks participating in the plan will suffer damage from the losses they will book by selling bad loans and illiquid securities, observers said. Regardless of the Treasury's plan, banks like Colonial BancGroup Inc. (CNB) may well have to continue to hope that private investors will recapitalize them. Colonial declined to comment for this story.

Bank of America Corp. (BAC), PNC Financial Services Group Inc. (PNC), Fifth Third Bancorp (FITB) all might benefit from the Treasury plan to provide guarantees and financial support to buy soured loans made in the boom years ahead of the financial crisis, said Christopher G. Marshall, the former chief financial officer of Fifth Third.

He called the Treasury's Public-Private Investment Program "exactly what's needed," and that it was a mistake of Geithner's predecessor Henry Paulson to abandon the original purpose of the Troubled Asset Relief Program which also sought the disposal of assets.

"What's warranted is that the people who do step in to buy" the bad assets "get attractive returns," roughly between 15% and 20% annually, he said. The plan announced Monday paves that way, because the government would provide the leverage that helps to generate those returns.

Thomas B. Michaud, a vice chairman of KBW Inc., agreed. "The market went from too much leverage to no leverage," and that led "to a massive problem in price discovery" for assets banks would like to sell, he said. Private investors had to rely on the loans or securities alone to generate their returns, but with the benefit of the government's leverage, investors are able to pay higher prices.

The Treasury intends to establish an auction process for assets banks want to sell.

"Those [banks] with enough capital" will benefit, Michaud said. "Those who can afford to rid themselves of the bad assets at the prices offered. If you are a very thinly capitalized institution you may feel as if you cannot afford to sell assets at the required prices."

However, in concert with the other government programs already put in place, the banking system might be on its way to stability, Michaud said. Though he said many will need to raise more capital to make it through the crisis.

Shares of financial companies rallied after Washington unveiled its blueprint. Bank of America and Citigroup Inc. (C) rose 17%, to around $7.30 and $3.05, respectively. Colonial's shares rallied 43%, to 93 cents.

-By Matthias Rieker, Dow Jones Newswires; 201-938-5936; matthias.rieker@dowjones.com

(Joe Bel Bruno contributed to this article.)