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Bill Radke: Treasury Secretary Timothy Geithner this morning unveiled a revamped financial rescue plan to untangle the banking system and support new lending. The bank rescue started life as TARP, the Troubled Asset Relief Program under President Bush. The Bush administration spent the first half of that $700 billion package.

This morning, Geithner revealed his plan for the second half of the package. It’s been renamed the “Financial Stability Plan,” or FSP.

Geithner addressed a growing public perception that the government is bailing out big banks at the expense of innocent taxpayers:

Tim Geithner: When our government provides support to banks, it is not for the benefit of banks. It is for the businesses and families who depend on banks, and it’s for the benefit of the country.

Geithner said a public-private investment fund will be established, seeded with government money. The idea is to leverage private money so that so-called toxic assets can be cleansed from the books of the faltering banking system. The hope is that that will help banks resume lending.

Analyst Christopher Whalen of Institutional Risk Analytics says the Treasury’s plan lets bank bondholders off too easy by protecting them instead of letting them take losses:

Christopher Whalen: So in two months, three months at most, we’ll come back to this. And once again, Secretary Geithner and President Obama will be standing there with a plan. And that’s OK, that’s what democracies do. But we have to focus on reality, and reality is you have to restructure some of these big banks. And that may mean that the bondholders have to take a loss.

The Treasury will also be devoting $50 billion in federal rescue funds to try to stem home foreclosures and soften the impact of the housing crisis.