Bailing Out on the American People

Now, I'm no economic expert, which may become painfully apparent with what I'm about to suggest.

But, I would like somebody to tell me why something like the following wouldn't work better than the current plan by Treasury Secretary Paulson. Essentially, Paulson wants the US Taxpayers to put up something like $700 billion to put into his hands, so that he can use somewhat cryptic means to fix the problem in our financial markets.

He says Congress should make this "clean and quick." That, to me, sounds like he's wanting a rubber stamp put on a plan with very little stipulations, and very little details on how this plan will actually be a wise move for American taxpayers.

So, here's what I'm thinking, and I want you all to tell me why it wouldn't work (or at least have as much a chance of working as a full-on bailout of moronic financial investment banks on Wall St.)

Firstly, though, for a good refresher on what has led up to this crises, see the following article from the Washington Post.

If the American taxpayers are going to be asked to foot a $700 billion dollar bill no matter what, why not target that money to where it is going to do the most good? Why not use a large chunk of that money to pay down the principle on so many of these bad mortgages these investment banks dolled out? Doing this would 1) lower the balance on these mostly worthless 'assets' held by all the investors out there who grabbed up these mortgages, thereby raising their value somewhat; 2) it would greatly LOWER the mortgage payments that American families would be spending each and every month to pay off their homes, putting more money directly into the hands of American taxpayers and providing a stimulus to the economy.

Secondly, LET THESE IRRESPONSIBLE INVESTMENT BANKS FAIL!! Recklessness, irresponsibility, and in some cases, outright fraud should not be tolerated or rewarded by a government taxpayer bail-out. Period.

Now, I understand that making sure people have the ability to borrow money is important. If solvency is not restored then we can see small businesses fail all across the country, which would have a rundown effect throughout every level of this economy. So, what I suggest is that we instead inject all this money into whatever RESPONSIBLE investment banks still exist (if there are any), rather than the ones which have shown their inability to run a solvent institution.

This serves two purposes -- it gets rid of these banks which have ruined confidence in the financial system AND makes sure that money is still available for people who need loans by helping the smaller, more responsible investment firms to pick up the slack left behind by the failing giants of the industry. As an added bonus, people can be confident knowing that only the responsible banks are left, and have more assurances that they would be borrowing and/or investing in assets properly screened.

To me, this makes FAR more sense than what is being proposed by Secretary Paulson. But, maybe I'm just an economic novice and missing something. I just don't see how giving a $700 billion check to the executive branch with no-strings attached is a responsible use of taxpayer money.

Now, start telling me why I'm wrong...