What to do with that $700 billion?  To answer this, he sat down with his friends, the leaders of the largest financial institutions in America that got us into this mess.

Namely, Ken Lewis, CEO of Bank of America; Jamie Dimon, CEO of J.P. Morgan Chase; Lloyd Blankfein, Paulson's successor at Goldman Sachs; John Mack, CEO of Morgan Stanley; and Vikram Pandit, CEO of Citigroup. 

These men have shown themselves to be far more interested in preserving themselves than in stabilizing the general economy for American citizens. And it's a safe bet (probably the safest out there) that their philosophy remains intact. 

And it turns out that Paulson's Plan B is not to completely abandon plan A.

So far, he has decided to spend $250 billion of that $700 billion to buy equity stakes in banks whose future losses are still unknown. The rest could conceivably be used to buy up toxic assets. These, and other related decisions are to be made, in large part, by Paulson's former protégé at Goldman Sachs (and now interim assistant treasury secretary) Neel Kashkari.

Kashkari described the equity purchase program as "voluntary and designed with attractive terms to encourage participation from healthy institutions." But encouraging participation hardly seems an issue. There's not a bank around that wouldn't want its stock price boosted by a Treasury purchase of its bleeding shares.

Equally, every bank has a bunch of toxic assets good to go. As Paulson waffles on action and plans, always weighing Wall Street demands first, European leaders are taking more decisive action with their coordinated capital-injection moves.

But it remains to be seen whether these will work. Perhaps their actions are an admission of responsibility; British and European institutions also made reckless bets with inadequate capital backing them. 

Hank Paulson & His Wall Street Cronies Move to Plan B

By GRETCHEN MORGENSON and LOUISE STORY

Three and half years ago, a New York hedge fund manager with a bearish view on the housing market was pounding the pavement on Wall Street.

Eager to increase his bets against subprime mortgages, the investor, John A. Paulson, canvassed firm after firm, looking for new ways to profit from home loans that he was sure would go sour.

Only a few investment banks agreed to help him. One was Deutsche Bank. The other was the mighty Goldman Sachs.

Mr. Paulson struck gold. His prescience made him billions and transformed him from a relative nobody into something of a celebrity on Wall Street and in Washington.

But now his brassy bets have thrust Mr. Paulson into an uncomfortable spotlight. On Friday, the Securities and Exchange Commission filed a civil fraud lawsuit against Goldman for neglecting to tell its customers that mortgage investments they were buying consisted of pools of dubious loans that Mr. Paulson had selected because they were highly likely to fail.

By betting against the pool of questionable mortgage bonds, Mr. Paulson made $1 billion when they collapsed just a few months later, the S.E.C. said. Investors, who bought what regulators are essentially calling a pig in a poke, lost the same amount.

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the piggery is full of smelly slop for some and gold for a few — gold that came from the taxpayers... With Paulson in charge it's a bit (a lot) like the wolves being in charge of the sheep...