Along with ending the short-selling ban, Treasury's latest plan "is an invitation to speculative attacks in which firms at risk are driven into ruinously dilutive recapitalizations," wrote Donald Luskin, chief investment officer of TrendMacrolytics.

Luskin says Treasury is taking too long to deploy capital, with no buys made in three weeks since Paulson unveiled the plan.

A wide range of sweeping changes to the 401(k) system were proposed Tuesday at a hearing on how the market crisis has devastated retirement savings plans.

Chief among them was eliminating $80 billion in tax savings for higher-income people enrolled in 401(k) retirement savings plans.

This was suggested by the chairman of the House Committee on Education and Labor.

“With respect to the 401(k), it appears to be a plan that is not really well-devised for the changes in the market,” Rep. George Miller, D-Calif., said.

“We’ve invested $80 billion into subsidizing this activity,” he said, referring to tax breaks allowed for 401(k) contributions and savings.

With savings rates going down, “what do we have to start to think about in Congress of whether or not we want to continue and invest that $80 billion for a policy that is not generating what we … say it should?” Mr. Miller said.

Congress should let workers trade their 401(k) assets for guaranteed retirement accounts made up of government bonds, suggested Teresa Ghilarducci, an economics professor at The New School for Social Research in New York.

Update... Shawn Smith comments,

Um, isn't that what Social Security is?

Most worker’s investments in stocks are through 401Ks. If 401K plans do not allow stock investments, then that reduces the number of investors significantly. Investors are more likely to be sympathetic to business concerns than noninvestors. So maybe the entire motivation behind this maneuver is to reduce the number of voters sympathetic to business concerns. In other words, this is a political move.

Having tried without success to unlock frozen credit markets, the Treasury Department is considering taking ownership stakes in many United States banks to try to restore confidence in the financial system, according to government officials.

At a news conference on Wednesday, the Treasury secretary, Henry M. Paulson Jr., pointedly named the Treasury’s new authority to inject capital into institutions as the first in a list of new powers included in the bailout law.

Specifically, the EESA [Emergency Economic Stabilization Act] empowers Treasury to use up to $700 billion to inject capital into financial institutions, to purchase or insure mortgage assets, and to purchase any other troubled assets that the Treasury and the Federal Reserve deem necessary to promote financial market stability.

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