Administration revamps bailout plan

WASHINGTON — The Bush administration is embracing an old adage when it comes to its financial rescue plan: Try, try again.

Urgently shifting course, the administration revamped its $700 billion bailout package by jettisoning the idea of purchasing banks' distressed assets — the centerpiece of the original plan — and announcing Wednesday that it will search for new ways to shore up not only banks but credit-card, auto-loan and other huge nonbank businesses.

Democrats, meanwhile, are pressing hard to include billions of dollars in help for faltering automakers — over administration objections.

Unimpressed by any of the overhaul talk, Wall Street dove ever lower.

"The facts changed and the situation worsened," Treasury Secretary Henry Paulson said at a news briefing, explaining the administration's switch from its plan to help financial institutions by buying up troubled assets, primarily securities backed by bad home loans, and instead continue to focus on direct purchases of bank stock.

Despite its new flexibility, the administration remained opposed to using the rescue fund to bail out the ailing auto industry or to provide guarantees for home loans, an idea that supporters contend offers the greatest hope for helping legions of Americans who are facing foreclosure.

Congressional Democrats felt otherwise on autos, and strongly. House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid were pressing for quick passage of a major package for carmakers during a postelection session that begins next Tuesday, and one key House Democrat was putting together legislation that would send $25 billion in emergency loans to the beleaguered industry in exchange for a government ownership stake in the Big Three car companies.

Not all the news was bad, Paulson suggested. He said the rescue program approved by Congress a month ago has already had an impact in dealing with the most severe financial crisis in decades, a credit squeeze that is threatening to push the country into a deep and prolonged recession.

"Our system is stronger and more stable than just a few weeks ago," he said. But he cautioned that much more needs to be done before the economy can turn the corner.

To accomplish those goals, Paulson said the administration would continue to use $250 billion of the $700 billion rescue fund to make direct purchases of bank stock as a way of supplying hundreds and potentially thousands of banks with extra capital in hopes that they will resume more normal lending.