The whole purpose of the bailout, we were told, was to allow the Treasury Department to purchase troubled assets–taking them off the books of banks that are imperiled–for the purpose of selling them at a later date, when prices have gone back up. This was supposed to get the banks to start lending again, so businesses could get short-term paper and families could buy and sell their homes.

Well, Paulson has announced that he has abandoned that approach, instead focusing on providing injections of capital into troubled banks.

At the same time, Treasury is unlikely to conduct any auctions to purchase bad loans and other troubled assets — the original intention of the $700 billion rescue plan. Instead, Treasury is expected to continue focusing its firepower on injecting capital directly into the financial sector, these people said.

Sadly, what Paulson is attempting is tantamount to faith-based monetary policy: just throw enough money at the problems, and they might go away.

I’ve never once seen a family–taking such an approach with their personal finances–succeed. I have yet to see a government attempt this approach with success either. Paulson is telling us that he can defy history, and the laws of economics.

It kind of reminds me of a De-Motivator poster I once saw.