From Harvard Prof. Lucien Bebchuk:

"The plan for buying troubled assets -- which was earlier announced as the central element of the administration's financial stability plan -- has been recently curtailed drastically. The Treasury and the FDIC have attributed this development to banks' new ability to raise capital through stock sales without having to sell toxic assets. But the program's inability to take off is in large part due to decisions by banking regulators and accounting officials to allow banks to pretend that toxic assets haven't declined in value as long as they avoid selling them."

(http://blogs.law.harvard.edu/corpgov/)

So basically, since the government relaxed its accounting standards, letting banks value their cruddy mortgage-based securities at whatever price they like, they had absolutely no incentive to sell them (at fair market value - er, a much lower price).   So they can go about business as  usual.

You know, sort of like taking out a home equity loan without telling the bank the house has burned down.  Known as "fraud" in insurance circles. 

Um, the emperor's still naked, Mr. Geithner...