Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke testified in Congress today. The purpose of the meeting was to clarify a new direction the Bush Administration is taking. Last week, Paulson did a virtual about-face on the $700 billion Troubled Asset Relief Program (TARP). He decided he didn’t want to use the TARP to guarantee mortgage-backed assets. This caused some lawmakers to scramble for more explanation.

So Paulson ascended the Hill with pronouncements like: the U.S. has “turned a corner” in avoiding financial collapse. His assessment downplayed immediate danger to asset-backed securities. Instead of purchasing these toxic notes, he defended his new plan to purchase stakes in banks. In his mind, this would be of immediate benefit to the current environment by greasing the skids of the credit markets.

Another revelation was Paulson’ intent to only spend half of the bailout package. His plan is to roll out $250 billion into direct stakes of major banks. He then plans a $40 billion injection into troubled reinsurer AIG, leaving $60 billion as a buffer for additional needs. Interestingly, he said the next administration would decide how to spend the rest of the money.

Finally, Paulson warned lawmakers not to view the TARP as a ‘panacea’ for the latest market woes. He suggested it’s merely a help to the market for getting everything in working order, not the ultimate solution for our financial problems. He said, “The rescue package was not intended to be an economic stimulus or an economic recovery package.”

Hold on a second, Mr. Paulson!

Wasn’t it you just who was down on one knee before the Speaker of the House begging for the stimulus package? Wasn’t it just you who warned of all sorts of catastrophic consequences if Congress didn’t give you the money? Wasn’t it you who has no problem spending Congress’ money…uh, I mean…our money to bailout banks who probably brought this situation on themselves.

Now it’s you who says, “we turned a corner.” Now it’s you who says, “I don’t really need $700 billion. (BTW, Politicians throw around ‘billions’ like drunks throw around quarters.) Now it’s you who says, “don’t think of it as a panacea.” Instead of being magnanimous and only taking half of our grandchildren’s debt, why don’t you just leave it all? One day we need $700 billion – the next you say we only need $350 billion. Is this how you ran Goldman’s budget when you were CEO? This whole thing is like a bad nightmare…or is it just a fairy tale?