As Treasury Secretary Henry Paulson acknowleged during a news conference on Wednesday, the initial decision to buy troubled mortgage assets of financial institutions was "not the most effective way" to use the $700 billion bailout package.

Instead, the Treasury will now use the money to buy securities backed by credit card debt, student loans, auto loans, housing and government agency debt. The intent is to help unfreeze those markets, where interest rates have soared and consumers often are unable to get credit for purchases.

Paulson said that 40 percent of US consumer credit is provided through such securities. "This market, which is vital for lending and growth, has for all practical purposes ground to a halt," Paulson said.

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The Treasury also plans to continue injecting money directly into troubled banks as well as nonbank financial institutions. There is one change, however: the banks may have to raise funds privately in order to get government money.

For Investors

So how exactly would the new plan work?

According to economists, the Treasury would simply go out and buy some of these consumer-debt securities whenever the price fell far enough to push the yield up to a certain level, say 9 percent.

Like Treasury bonds, these debt securities have a fixed interest rate, so their yield changes according to whatever price investors are willing to pay for them.

If investors knew that the government would enter the market whenever the yield on these securities hit 9%, the theory goes, that would encourage them to buy up the debt as well.