At one point during a hearing on the bank bailout in the House of Representatives on Tuesday, Treasury Secretary Henry M. Paulson Jr. said that he was being misunderstood about why he refused to use any of the $700 billion bailout fund to prevent foreclosures.

He has made it clear that he knows the housing bust is at the root of the financial crisis and the economic downturn. But he said at the hearing that using the bailout money for foreclosure relief would violate the intent of the rescue approved by Congress because it would be a “direct subsidy” rather than an “investment.”

Direct subsidy is a synonym for government spending, which the Bush administration seems to believe promises no chance of ever yielding a return. Investing, on the other hand, say in stocks, holds out the hope of getting one’s money back.

In an exchange with Representative Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, it quickly became apparent that it was Mr. Paulson who did not understand the intent of Congress as expressed in the bailout bill. And in subsequent testimony by another witness  Sheila Bair, the chairwoman of the Federal Deposit Insurance Corporation  Mr. Paulson’s simplistic distinction between direct spending (bad) and investing (good) was demolished.