The primary purpose of any bailout should be to help people keep their
homes to prevent mass foreclosures from further damaging the real
estate market. The more houses that are put on the market the
lower the value of other houses. A major decline in the value of
houses in general would reduce the assets of banks
that have more conservative mortgage programs. Such a reduction
could create problems for these banks.

Payment for the bailout should come as much as possible from those who
created the problem including both creditors and debtors, instead of
taxpayers in general.

The federal government should buy up bad mortgages at full current
value for
homes that haven't been foreclosed on. If the lender has
foreclosed on the property the federal government shouldn't pay
anything more than the current market value of the home. The
foreclosed
homes should be turned over to the Department of Housing and Urban
Development to be used in part tor a program to help military veterans,
school teachers, law enforcement officers and firefighters to purchase
homes.

Payment to companies should take the form of Treasure bills redeemable
under a schedule that would allow 10% to be redeemed in one year,
another 10% in two years, etc. Alternatively Congress might limit
redemption of the bonds to 5% per year. Companies could use these
T-bills
to compensate employees or pay future federal income taxes.
Companies accepting
federal aid should be required to pay an extra income tax on total
revenue over the next 20 years with only limited deductions allowed.
Congress should consider a surtax on high executives in firms
that are in trouble, possibly applying the tax to all income above some
threshold without allowing deductions. The IRS
should audit these firms each year.

Homeowners with bad mortgages where appropriate would
have to file for bankruptcy to get out of any credit card
debts. Congress would create a special exception to
bankruptcy law to allow them to file "emergency" bankruptcy.
Eliminately consumer debt would improve their ability to pay on
the mortgage.

Homeowners who would still have difficulty making mortgage payments
could be allowed to trade for one of the lower valued foreclosed houses
the federal government takes over.

The interest on the mortgage would be the same rate as on the T-bills
used for the bailout. Congress should consider requiring
these individuals to have mortgage payments deducted from their
paychecks along with the money withheld for income taxes. These
homeowners would be helping to pay for the bailout.

HUD would offer former residents of the foreclosed houses an
opportunity to regain these homes at the reduced value
under the same conditions as those in houses that haven' t been
foreclosed on yet. These individuals would also help pay for the
bailout.

The Great Depression lasted so long not because banks failed, but
because the bank failures eliminated the assets of depositors.
Bank foreclosures of houses and businesses, particularly farms, further
eliminated assets held by individuals that might have been used to turn
the economy around. The foreclosures didn't help the banks
because few could afford to buy the foreclosed properties.