Michael Ettlinger on Paulson's U-Turn

Treasury Secretary Hank Paulson has done a surprise u-turn on how he's going to use the $700 billion from the rescue package that Congress passed in October. Originally he sold that as a plan to buy mortgage-backed securities, clearing the toxic waste assets off the books of lenders.

Treasury had already departed from that plan, using the first $250 billion to pump capital into banks. That was already a strange development because Paulson had originally ridiculed the idea of making those kinds of investments. But there's plenty of money still left in the fund, so the assumption has always been that they would get back to the original notion of buying mortgage-backed securities.

Now Paulson says, "Nope that's not what we're going to do." And it's not clear what they're going to do. He threw out a few ideas but it's still very unclear.

Throughout this whole collapse the administration has lurched from one poorly thought out idea to the next without ever really having a comprehensive plan for dealing with this. Here at the Center for American Progress, we still think that you need to get back to the basics of doing something about the mortgage situation and getting the housing market and mortgages stabilized.