WASHINGTON --- First, the $700 billion rescue for the economy was about buying devalued mortgage-backed securities from tottering banks to unclog frozen credit markets.
Then it was about using $250 billion of it to buy stakes in banks. The idea was that banks would use the money to start making loans again.
But reports surfaced that bankers might instead use the money to buy other banks, pay dividends, give employees a raise and executives a bonus, or just sit on it. Insurance companies now want a piece; maybe automakers, too, even though Congress has approved $25 billion in low-interest loans for them.
Three weeks after becoming law, and with the first dollar of the $700 billion yet to go out, officials are just beginning to talk about helping a few strapped homeowners keep the foreclosure wolf from the door.
As the crisis worsens, the government's reaction keeps changing. Lawmakers in both parties are starting to gripe that the bailout is turning out to be far different from what the Bush administration sold to Congress.
In buying equity stakes in banks, the Treasury has "deviated significantly from its original course," said Alabama Sen. Richard Shelby, the top Republican on the Senate Banking, Housing and Urban Affairs Committee and a critic of the bailout. "We need to examine closely the reason for this change."
The centerpiece of the Emergency Economic Stabilization Act is the "troubled asset relief program." The money was to be devoted to buying "toxic" mortgage-backed securities whose value has fallen in lockstep with home prices.
But once European governments said they were going into the banking business, Treasury Secretary Henry Paulson followed suit and diverted $250 billion to buy stock in healthy banks to spur lending.
Bank executives hinted they might instead use it for acquisitions. Sen. Christopher Dodd, the chairman of the Senate banking committee, said this development was "beyond troubling."
A day after Mr. Dodd, D-Conn., made the comment, the government confirmed that PNC Financial Services Group Inc. was approved to receive $7.7 billion in return for company stock. At the same time, PNC said it was acquiring National City Corp. for $5.58 billion.
"Although there will be some consolidation, that's not the driver behind this program," Mr. Paulson recently told PBS talk show host Charlie Rose. "The driver is to have our healthy banks be well-capitalized so that they can play the role they need to play for our country right now."
OTHER PLANNED uses of the bailout money have lawmakers protesting, though there is nothing in the law that they just wrote to prevent those uses.
Neel Kashkari, the head of the Treasury's financial stability program, told Mr. Dodd's committee this past week that there are few strings attached to the capital-infusion program because too many rules would discourage financial institutions from participating.
As the bank plan has become a priority, the effort to buy troubled assets has receded from the headlines. Potential conflicts of interest pose all kinds of problems in finding qualified companies to manage that program.
The challenge was made plain when the Treasury hired the Bank of New York Mellon Corp. as "custodian" of the troubled assets purchase program.
On the same day it hired Mellon, the Treasury also picked the company to receive a $3 billion investment as part of the capital-infusion program. The same bank hired to help manage part of the economic rescue plan became a beneficiary of it.
MORE WANT PIECE OF $250 BILLION
WASHINGTON --- Insurers, automakers and American subsidiaries of foreign banks all want the Treasury Department to cut them a piece of the largest government rescue in U.S. history.
These groups argue that the credit squeeze is so severe and the risks to the economy so dire that their industries need financial support also.
The Treasury is considering requests from a variety of industries, but it has not decided whether to expand the program, officials said Saturday.
The Financial Services Roundtable wrote Treasury officials Friday requesting that the initiative to buy $250 billion in bank stock grow to cover insurers, auto companies, securities dealers and U.S. subsidiaries of foreign companies, including banks.
The Roundtable's president, Steve Bartlett, urged the Treasury to broaden the definition of those eligible for the stock purchase program.
A financial industry official said Treasury Secretary Henry Paulson met over the past week with various groups, including hedge fund managers, that were petitioning for assistance. The official spoke on condition of anonymity because a decision hasn't been made.