He's basically given up on the controversial plan to purchase toxic mortgage assets, which had been the centerpiece of the government's $700 billion bailout. Instead, the feds will continue to use $250 billion of the program to purchase stock in banks. At this point, it’s considered the best way of bolstering balance sheets and encouraging more lending. No doubt the Treasury Secretary will get lots of grief for the about-face. But the NYT's Andrew Ross Sorkin says he should be applauded for abandoning a plan that has been deemed unworkable.

Remember what John Maynard Keynes, the British economist, famously said when he was accused of flip-flopping on his views about government intervention in the markets during the Great Depression: “When the facts change, I change my mind. What do you do, sir?” Most politicians would have gripped tightly to their original plan for fear that acknowledging failure would be even worse.

Not that it really matters, but Paulson wouldn't admit to actually making a mistake. "The facts changed and the situation worsened" is the way he rationalized the switch. And he’s right, of course. But what this really shows is how clueless the government has been in coming up with workable solutions. That’s how bad things are. No wonder the Dow lost more than 400 points.