The original direction of the $700 billion bailout plan is evolving over time. It began as a means of buying ‘toxic’ assets from financial institutions, and expanded into buying equity stakes in banks as another way to inject capital into financial institutions; both are intended to unfreeze the credit markets and to spur more lending. Now, as we note here, the program may expand further as the Treasury contemplates doing the same for other credit-related industries.

But meanwhile, back on the banking ranch, a rift has developed between a growing number of lawmakers and the Bush administration over the use of the cash that’s been extended to the banks which have received stock investments.

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Here’s a good (and short) question and answer piece on the recently-passed ‘bailout’ bill. Sample question:

Will tight lending ease and stabilize falling housing prices and the housing market? Will it ease consumer and commercial credit?

If the bailout succeeds, within weeks consumers likely will find it easier to get mortgages and other consumer loans. But lending standards – especially in relation to home loans – aren’t likely to loosen to levels that preceded the financial crisis. Lenders will continue to place added scrutiny on borrowers’ ability to repay, closely looking at credit scores and incomes. Down payments for all types of loans are increasingly important now and likely will remain so.

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In a vote that could be cast as early as Thursday, the most widespread financial rescue by a government could be passed into law. The Treasury Department sent the latest version of their proposal to Congress yesterday, where Democrats have already begun to critique and add provisions to the bailout that leaves taxpayers footing a $700 billion bill.

Congress would like to increase their oversight over the Treasury Department, add additional aid for homeowners, make changes to the bankruptcy laws, and most controversially, curb the large salaries of the top executives of the firms participating in the government’s rescue plan.

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