The White House is abruptly overhauling plans for the $700 billion bailout package it pushed through Congress just two week ago—raising fears that valuable time was lost on a plan not carefully considered, reports the New York Times. Instead of using funds to buy up troubled securities as initially intended, the focus will now shift to purchasing bank equity—in essence partially nationalizing banks. It's the same tactic the British government began last week.
White House officials derided a similar proposal by Democrats just last month. The Bush administration's opposition to government ownership of private stock may have blinded it to the most effective way to save the economy, observers fear. The apparent uncertainty of the plan's direction also creates problems, say observers. “If you delay and create uncertainty, the amount of money you have to put up goes up," warned an economics professor.