According to the Federal Reserve, the total outstanding Home Mortgage Debt on September 30th, 2008 was $10.571 Trillion. See: http://www.federalreserve.gov/releases/z1/Current/z1r-4.pdf Page 94.
The U.S. Government as of this writing as committed $9 Trillion to the Financial System. See: http://www.nytimes.com/interactive/2009/02/04/business/20090205-bailout-totals-graphic.html
Just add a little more and pay off everyone’s home. That will immediately increase consumer spending and fix the problem. It’s simple!
This would eliminate the sub-prime mortgage issue, the drop in asset value of borrowers, and the derivatives tied to non-performance of bonds issued against Fannie Mae & Freddie Mac.
With no mortgage payments, families would begin to ease up on their fear of losing net worth. Savings would increase across the board and provide banks with a new source of cheap money to lend out.
Oops! Wait a minute, we really need to take care of Wall Street instead. Sorry America.