12/14/2008 05:12 am ET | Updated May 25, 2011

Over Six Weeks, The Toxic-Loan Plan Never Got Started

Paulson announced Wednesday that the federal government would formally abandon plans to buy troubled mortgage-backed securities from banks and other big investors to instead focus its efforts on thawing credit markets.

The shift, however, had been in place since last month. A week after the package was passed by Congress on Oct. 3, Paulson began signaling that the thrust had changed and that much of the $700 billion instead would go toward providing capital to banks by investing in their preferred shares.

That action might be compared to replacing a gravely ill patient's slow intravenous drip with a shot of adrenaline into the heart. The stock market rallied, and over the next few weeks the capital injections intensified and talk of the asset purchases ebbed.

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