How about trying this? If the root cause of the meltdown is a collapse in the overly exuberant housing market, why not take say, $700 billion or so, and buy individual mortgages at reduced interest rates? Ordinary people struggling to stave off foreclosure will have an option other than selling their home for any price they can get. The mortgage-backed securities will regain value, housing prices will stabilize because the supply will decline, and we're investing in ourselves rather than in investment houses that we all know played fast-and-loose with the markets and with our money.
Or, as taxpayers perhaps we could buy the homes outright, and rent back to the homeowners on a rent-to-own basis. It would accomplish the same thing. We put Homeland Security into place after 9-11, we could take HUD and turn it into an agency that manages housing stock at least until the situation stabilizes.
I know that the problem in the credit markets is real, and that we will all feel it soon. But, if lenders know that corporate borrowers are supported by a stable housing industry, that might help.
This bill isn't passing Congress because most members are not economists or investment bankers. They are politicians. They know when their constituents are fighting mad, and right now they are. There is simply no appetite to appear to bailout people who make more money in a year than most will make in a lifetime or even two lifetimes. Shortsighted, maybe, but it's real.
I wish I was seeing a little more leadership from either of the two candidates. I think this crisis has their economic advisers so freaked out they don't know what to say.
They should call me ;-)