The Treasury Department shifted gears again Tuesday and this time might have found traction as it steers through the worst credit crunch in 80 years.

Treasury said Tuesday it would spend up to $250 billion to buy ownership stakes in a broad range of banks, using authority given it under the bailout law signed by President George W. Bush earlier this month. The $250 billion is the first of several installments in the $700 billion plan.

The U.S efforts come after European countries took similar moves over the weekend. Equity markets around the world leaped to life on the news of the coordinated move, with the Dow Jones industrials rising more than 900 points on Monday. But share prices wilted Tuesday and Wednesday over fears of a global recession.

The U.S. plan is similar to its foreign counterparts. It includes increased deposit insurance, extending it even to non-interest-bearing checking accounts. The FDIC also is preparing to backstop certain kinds of new debt issued by banks to help them raise capital, and the Federal Reserve will become a buyer of last resort for commercial paper, which many businesses use for short-term financing. All of this is designed to convince banks that it is safe to lend money; they have been fearful of making loans that would not be paid back.

Treasury Secretary Henry Paulson should have gone in this direction earlier. But that's much easier to see now than it was three weeks ago. And it's unlikely that Congress — or the American people — would have been more receptive to this idea than they were to the original bailout proposal. As the magnitude of the credit collapse became clearer, Paulson has moved pragmatically and swiftly to shore up the system with measures that must be distasteful for a free-market thinker. Nonetheless, they are necessary.

We'd agree with Nancy Koehn, a historian at the Harvard Business School, who told The New York Times on Monday: "The goal is to get the engine of capitalism going as productively as possible. Ideology is a luxury good in times of crisis."

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