How would YOU handle the finantial crisis?

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1. Freeze all mortgage rate hikes.

Most people are foreclosing due to the 2yr spot when their interest rates adjust up for the first time. This puts the mortgage payment above their means to pay the bills due to their idiocy of not planning correctly for the future changes. By stopping that increase temporarily until the market has stabilized and house values begin to increase you allow more home owners to remain and banks to get stuck with far less bad debts. Then once the house market begins to increase at a normal rate the people now have equity and an opportunity to apply for new loans at better rates or at least better payment terms that they can afford and keep their homes.

2. Do not 'bail out' the banks.

The principle of capitalism is that bad choices will cause you to fall and/or be purchased by those who were smarter. The market will fix itself over time. Just like the .com bubble before, the companies who are failing will either be bought by the government or some other bank at a price that is really low and will make all of those bad debts into great investments for the buyer.

Example. I have a $250,000 home. It is now worth $200,000. I foreclose on my home and the bank is stuck with a possible $50,000 to $75,000 loss on my home IF they can resell it. They get enough of these and must now sell to a larger company. That company effectively buys my loan for $180,000 when it buys the company. It now has $20,000 in potential profit by selling the home at or near its current value.

I would think these two combined would be the best options.