Financial Crisis: Bailout people, not powerful!

Remember Al Gore’s wild chant in 2000, “the people, not the powerful! The people, not the powerful!”

Well, I got a little sense of that – and a Chris Matthewsian tingle up my leg – when I read this idea (H/T Instapundit):

If (1) the federal government really has about a trillion dollars to throw at this problem, and (2) taxpayers are being asked to foot the bill, then (3) why not structure the solution so that, as much and as directly as possible, “we the people (the taxpayers)” BAIL OUT OURSELVES? Why not aim at what Krugman calls “Step 1” by helping millions of ordinary American homeowners (largely the same ordinary American taxpayers who will finance any solution) avoid that “surge in defaults and foreclosures” by firming up the grassroots basis for all those dicey “mortgage-related securities”?

After all, there’s nothing new about government and taxpayers subsidizing home ownership by most Americans of middle incomes and modest means (through tax deductions, creating Fannie Mae and Freddie Mac in the first place, the recent govt takeover of FM/FM, etc, etc).

So, instead of the massive moral hazard — and general unseemliness — of putting taxpayer money on the line to bail out Wall Street banks and brokers at the top end of the pyramid, why not aim at the broad BASE of the pyramid?

The money is there. I mean really, isn’t it funny how when political leaders and powerful interests like Wall Street REALLY need cash, they somehow find a way to pull it out of the federal government’s [ahem]?
To put it more politely: They just stick taxpayers with the bill.

Year after year, there’s somehow never enough money to fund universal guaranteed health insurance (and whatever bailout is passed to deal with this crisis will provide yet one more excuse). But need to invade a foreign country on false pretenses, even in a time of huge deficits? No problem! Need to spend about a TRILLION to bail out Wall Street? Deficits be damned!

America’s population is about 300 million. Divide by 4 (typical household size) and you get maybe 75 million households. Even that doubtless overstates the number of owner-occupied homes covered by bank mortgages, with a value less than, say, $1 million or so (we should exclude the very wealthy — if the $5 million La Jolla mansion is about to be foreclosed, I say tough luck — John McCain, of course, would make $5 million the cutoff, having suggested that anyone under that is middle class — whatever). And remember, you have to exclude the homeless, renters, nursing home residents, all the dependents who live in each mortgaged home, etc.

So, maybe 50 million owner-occupied homes, of middle-class or lower value, with mortgages? Close enough for government work.

Divide $1 trillion by 50 million and you get $20,000 — not to be sneezed at! Over two years, that could cut almost $1,000 off every single monthly mortgage check in America! That amount of mortgage relief targeted directly at the millions of American taxpayers and homeowners of middle incomes and modest means would be an ENORMOUS shot in the arm to the economy (dwarfing the piddly recent “economic stimulus” checks). And it SHOULD mostly solve a crisis supposedly rooted in overextended mortgage lending, and securities built shakily on same.

Read it all, but I think this fellow’s got something, there. Clearly, the government would have to control that money; you can’t send $20,000 to each homeowner and expect them to be diligent about applying those funds directly toward their mortgages each month. But if the government is going to bail out the banks, why not do it through the homeowners, each month applying a portion of the bailout monies to each mortgage? A nightmare of bookkeeping you say? I can think of worse nightmares. This solution keeps people in their homes, and shores up the economy a bit. I like this idea more than anything else I’m seeing floating by! I say get on this. Bail out THE PEOPLE, NOT THE POWERFUL!

Hey, call the White House. Call Congress. Why not?

Meanwhile: Arnold Kling says the bailout currently under consideration in congress could hurt more than help. I believe it.

The markets sure aren’t liking it

The Pelosi says she’s scared and does not want to actually lead anything unless the Republicans can be safely blamed for anything that doesn’t work. She’ll porkify a solution, but she doesn’t want any blame, only credit. This woman is a disgrace whose ability to lead is only effective when it is focused on negatives.

But to be fair…we’re not seeing any prodigies of leadership in either house just now, are we? Harry Reid can’t stop playing games, but they all are, in one way or another. Reid’s is just particularly pernicious, since it generates false headlines that remain in the public mind.

Keep it simple: good advice Congress Never Takes! Jonah Goldberg has an interesting post

James Pethokoukis wants to know if Bernanke and Paulson are overhyping things?

And um…while all this is going on? Well, you can buy yourself a President Barack Obama Coin. Nice. Helpful.

Btw, while no one is paying attention, the Iraqis are pulling themselves together quite nicely and passing election laws, while in Ohio, a Democrat SecState is disenfranchising Republican voters at an alarming rate, six weeks before the election. I’m glad some country is practicing democracy.

Grand Rants says: Don’t give up; it’s time to show our best.

Someone wrote asking me to come up with a 9-day novena, a prayer for wisdom in this mess. I do believe we absolutely must pray for wisdom, especially for wisdom in our leadership, so I’ll think about that.

Related: Financial Crisis; Spiritual and Secular Perspectives