The key problem that is leading to the liquidity crisis is that far too many mortgages are entering foreclosure, and (at this point) the main reason for this is that the market value of the home is far less than the value of the mortgage. In my opinion, if you're going to go down the path of spending an insane ammount of money to fix a problem, you should focus on the core problem and not one of the symptoms; if you don't address this problem all the money you spend today will only be a temporary fix.
In my opinion, the stupid and expensive way to address this problem would be for the government and banks to get together and each pay off 33% of the portion of the mortgage that is above the value of the home. Many individuals who currently owe $30,000 to $60,000 more on their mortgage more than their home is worth would be far more likely to keep paying their mortgage if this was reduced to $10,000 to $20,000 being that it is far more likely that the home will regain enough value over the next few years to have positive equity.
I could be wrong, but I suspect that this approach would be far less expensive than the $700,000,000,000 bail out that is currently planned being that not all houses have negative equity, and most of those that have negative equity probably have less than $30,000. The other benefit of this approach is that both the banks who gave out the mortgages, and the (foolish) homeowner are not let off the hook for their mistakes.
