The current financial crisis is being mishandled in the most irresponsible way imaginable. What we have the current administration trying to do, is use band aids - to stop wounds caused by a machine gun.

So what can be done now?

Of the 700 billion that has been promised by the taxpayers to help with cleaning up the mess, 350 billion has already been squandered away - much like pouring sacks of salt into the ocean.

I would recommend that the remaining 350 billion be spent as follows:

1) Buy all the toxic assets that are currently plaguing the financial industry. These should include the CDOs, CMOs and other bits of the alphabet soup that are the foundation of this crisis.

2) The price for these assets should be determined in the most pessimistic way possible - even if it means paying mere pennies on the dollar and the collapse of many financial companies. 

3) Foreign institutions that own these securities should be given the option of either selling it to the US Government - or forfeiting it altogether. I understand that such actions will cause some turmoil in the marketplace - but what are we seeing right now anyway?

4) The money being paid to these institutions is the bare minimum that they will make upon sale of these securities. Their share should be noted and kept for future reference.

5) These structures that have been created by our fanciful (and overpaid) nuclear physicists and  mathematicians - well they need to be reverse-engineered into the individual loans that were used to make them up.

6) This is actually quite easy - simply ask the two new arms of the US Government, Fannie Mae and Freddie Mac, with their legions of IT and support personnel that are currently sitting idle (who have full knowledge on how to securities loans) to undo what has beendone. There are also lots of idle computers at these organizations that can be used productively to assist in this endeavour. Of course, a few phone calls to the mortgage servicers will be needed. Time needed - about 2-4 weeks.

7)  For each loan from step 6, look up the primary and secondarySSNs and determin, with a credit check, if this is the only mortgage payment being made, or if there are other payments - eliminate all loans that have SSNs with multiple mortgage payments

8) Run another credit check to ensure that there are no more properties owned by the SSNs that remain after step 7. This will eliminate speculators. 

9) What you have remaining is the list of SSNs living in the home that is backing this loan. They also (most probably) are the unfortunate ones that have these sub prime loans and are probably about to default. 

10) The remainder of the 350 billion (what? do you mean all of it was used to buy the toxic asset? No way! Remember pennies-on-the-dollar?) should be used to help these home owners. Help could be rendered in multiple ways (reducing their outstanding balance by writing off the capital loss AND/OR giving the family some assistance for the next few months/year AND/OR restructuring the mortgage into a lower rate fixed mortgage etc.)

11) The people that have been eliminated in steps 7 and 8 should be allowed to default and the investors in those assets should suffer the losses. The structures that were created with these mortgages as the backing should be updated accordingly. 

12) The people who have received mortgage assistance in step 10, should pay the US gvernment at least 50% of any future capital gain - unless they have lived in the same house for at least alf the mortgage's life. This capital gain should be recorded in the appropriate structure that theoriginal mortgage was a part of so that the investors (remember the ones that received pennies-on-the-dollar?) can get the benefit.

I sent the above plan (or a modified/simplified version of it to the Senators representing NJ - but, as is evident, precious little has come of it.

Thoughts and reactions welcome.