A week ago what did Hank Paulson, the US Treasury Secretary, want?

Mr Paulson wanted fast approval for a $700 billion blank cheque and for the national debt be raised to $11.3 trillion. The money was to be put in a federally backed fund, entirely controlled by the US Treasury. It would be used to acquire banks’ “toxic assets” at a big discount. He would control who managed the fund and how much they were paid. He hoped the Treasury would then sit on the fund until the market recovered and then sell the assets. Banks that benefited from the bailout would in return have to be better and more closely regulated.

What did politicians agree on Thursday, before Republican rebels began to cause trouble?

Both sides agreed on enough broad principles to be confident of getting legislation through in a few days, but the Republicans refused to agree to Mr Paulson’s insistance on paying the $700 billion in instalments. The Democrats had their own concerns. Mr Paulson, a former chief executive of the Goldman Sachs investment bank, did not want Washington to have power to cap severance pay for bank executives. He lost that battle. One sticking point that remained was whether to give bankruptcy judges the power to force mortgage lenders to lower their rates so that struggling borrowers could stay in their homes.

What would the package look like if the Republican rebels get their way?

Very different. In fact, it wouldn’t be a bailout package at all – rather, an alternative scheme that depended less on taxpayers. The Republicans want an insurance-based alternative where banks would pay large premiums to the Treasury, which would insure their toxic investments against the risk of default. Mr Paulson says this is unworkable. The Democrats have dug in their heels over executive pay caps, equity stakes in bailed-out banks and tough oversight of the Treasury.

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