Is it a bird? Is it a plane? No, it a ... Perpetual Trust Preferred Security

I've seen a few stories in the press recently about a new breed of hybrid security that has characteristic of both stock and bonds:

This year, Wall Street is expecting a flood of hybrid offerings from U.S. companies, especially banks looking to refinance older, more costly debt. By some estimates, U.S. banks could sell up to $40 billion in hybrid securities in 2006, a more than fivefold increase over last year... Recent moves by regulators and credit rating agencies are making a new line of hybrids particularly attractive to banks looking for a cheaper way to finance stock buybacks and acquisitions... Such offerings are treated by the rating agencies as equity... The bank that issues either of these hybrid securities gets to claim a tax deduction on the interest payments.

I'm really puzzled why the IRS lets companies cliam a tax deduction on the interest payments. Might have something to do with the inheriant risk the interest payments will not occur if the investment does not meet a minimum financial target for that payment period.