$700 billion plan

From Yahoo Finance
Paulson just announced today that instead of using the $700 billion to buy up assets, the Treasury will be using it to buy stakes in banks to force the banks to loan out money.

Even though the governments everywhere has been throwing money at the credit crisis, the banks have been using the money to shore up their own finances instead of extending credit. Fed funds rate (how much it costs banks to borrow) went from 5% to 1.5% over the past 2 years while he 30 year mortgage rate stayed around 6%. Meaning the banks' margin went from 2% to 5%. So now the idea is to grab a stake in the banks and force them to lend. This is actually a bit scary because the decision making process has more of political taint in it than before. But then again, the situation is getting pretty dire.

Another question is how will the Congress look at this change of plans. The money is not being used for it's intended use. I foresee more bickering coming up...