Special Report: Global Financial Crisis

    WASHINGTON, Nov. 14 (Xinhua) -- After weighing carefully, the U.S. administration has moved to change the course on how to use the 700 billion U.S. dollars rescue plan more efficiently.

    The administration has decided to scrap what had originally been the centerpiece of the program buying troubled assets to get them off the books of banks to promote lending, Treasury Secretary Henry Paulson said.

    This means the administration has completely abandoned previous ways of tackling the financial crisis and resorted to new and probably more efficient measures.

    The government once expected the buying of troubled assets could help financial institutions restore their normal operations and get the United States out of the financial crisis.

    But the praxis over the past month showed that the bailout plan has not had much real effect in stabilizing the financial market, observers say.

    The 700 billion dollars will be little more than a drop in the bucket as the scale of troubled assets in the U.S. banks is huge, they believe.

    Furthermore, even when troubled assets can be cleared with the bailout funds, the unwillingness of the banks to lend out money will not go away under the current situation. So the financial crisis will not be eased if the banks remain unwilling to extend loans.

    Already in the first phase of the 700 billion dollars rescue plan, the U.S. administration has made slight adjustments to previous ways -- buying stocks of the banks instead of troubled assets.

    The administration has been proceeding with the alternative plan to spend 250 billion dollars to buy stocks in the banks as a way of bolstering their financial situation and accomplishing the same goal -- getting the institutions to their normal lending.

    Buying stocks in the banks has proved to be more effective than buying troubled assets but there also exists a big problem: the money for the move is not sufficient.

    Among the 700 billion dollars, the government can use only 350 billion in the first half of the bailout plan, according to conditions set by the Congress on the use of the rescue package.

    At present, the administration has only 60 billion dollars rescue funds available. The Treasury Department has so far devoted250 billion dollars of the bailout money to buying stocks in banks and another 40 billion dollars to insurance giant American International Group Inc.

    Analysts say Congress will not rashly release the rest 350 billion dollars given the effect the rescue plan has produced so far.

    Paulson said there must be a shift of course in the second phase of the rescue plan and the U.S. administration is studying what more efficient measures it can take.

    American officials have said the second phase could focus on consumers in an attempt to encourage consumption, different from the first phase when priority was given to helping financial institutions.

    There will be such regulations in the second phase as that financial institutions, which want to share the rescue package, will have to pool enough private funds. The move is aimed at alluring private investment back to the financial market.

    The Treasury Department and Federal Reserve will also probably cooperate in taking measures encouraging money lending by consumers, such as funding such vital consumer products as credit cards and mortgage loans.

    As U.S. automobile industry is on the verge of bankruptcy, some Congressmen also said that the government should enlarge the scope of the government's rescue efforts, to help the Big Three car producers, General Motors, Ford and Chrysler, to tide over their difficulties.

    Experts say any of the plans is controversial and the U.S. government has to be very prudent before taking any move. Meanwhile hesitation could add to panic in the market.

    The course-shifting of the 700 billion dollar rescue plan has shown the complexity and seriousness of the financial crisis, which has proven to be more thorny than it had been expected, analysts say.

    Paulson has admitted that current U.S. financial system is still very weak as troubled assets in the banks remain a big problem and the U.S. economy continues to retreat. All the challenges are testing the U.S. administration's wisdom, observers say.