When the $700 billion bailout was first proposed, the idea was that the money would be used to buy up bad assets. Today, though, the Treasury Secretary said the money wouldn't be used for that after all.

http://www.cbsnews.com/stories/2008/11/12/national/main4594859.shtml

The administration decided that using billions of dollars to buy troubled assets of financial institutions at the current time was "not the most effective way" to use the $700 billion bailout package, he said.

The announcement marked a major shift for the administration which had talked only about purchasing troubled assets as it lobbied Congress to pass the massive bailout bill.

At least the idea of buying "troubled assets" meant the government would end up holding real assets that had some value. The spending to-date, however, has been used to try to prop up companies which could very well burn through the money and leave the government holding worthless stock.

So now, as many of us rather expected, we have a $700 billion slush fund that can be used for whatever the Treasury decides to spend on a whim. First they go one direction and then they go another--and that doesn't give me a lot of confidence that they are really thinking rationally and strategically what to do with the money. Heck, banks that received cash injections have been contemplating buying other banks with the money rather than resuming lending--which means the money the government is injecting isn't helping to get the credit market going.

After the hundreds of billions that have already been spent, the credit market is apparently still frozen:

Paulson said the administration will continue to use $250 billion of the program to purchase stock in banks as a way to bolster their balance sheets and encourage them to resume more normal lending.

He announced a new goal for the program to support financial markets, which supply consumer credit in such areas as credit card debt, auto loans and student loans.

Paulson said that 40 percent of U.S. consumer credit is provided through selling securities that are backed by pools of auto loans and other such debt. He said these markets need support.

"This market, which is vital for lending and growth, has for all practical purposes ground to a halt," Paulson said.

It's not at all clear that the money the government is spending is having the desired results and rather than use the money for the purposes that were originally "sold" to Congress, the money will continue to be spent on the same things that, thus far, have not had the desired effect.

The FY2009 federal budget is about $3 trillion and is subject to months and months of negotiation and checks and balances between the House, Senate, and the Executive Branch. Yet the Treasury is currently in charge of about 1/4th as much money with pretty much no oversight and no guarantees the money is being spent in the best possible manner. And so far it isn't working.