If the problem that Congress is trying to solve with the biggest economic stimulus package the nation has ever seen is that regular homeowners and business won't have access to capital, then why don't we fund the credit unions and local banks that are currently making mortgages and business loans to regular homeowners and businesses?
Instead of subsidizing the bondholders who are supposed to cover the bad loans of the massive banks/insurance companies/investment banks when they make stupid decisions, why don't we directly solve the problem which is a potential lack of capital to regular Americans.
I don't care if the big banks fail, so long as everyone else still has access to capital. Their stupid decisions to buy ridiculously bad loans is not my fault and I'm not at all interested in paying for their mistakes. So let's target any solution to the problem we are about -- access to capital for the little guys -- and avoid those toxic mega-banks altogether. Let them take the hit and have the other mega-rich players who have profited immensely over their stupid decisions to buy bad loans sort it out. And let's wait until President Obama runs things before we spend the money.
Now, I might be missing something obvious, but it sure seems to me that the right move is to reject the Bush Administration rich bank buyout and instead pump that liquidity into financial institutions that will loan directly to Main Street. Those are the credit unions or local banks that never got involved in this mess in the first place.
And frankly, I'd rather President Obama figure this out than President Bush. So long as Congressional leaders and President Obama commit to an economic stimulus in 2009, then the market psychology can calculate that and not get into a panic. Wait until the good guys run the government. Solve the problem them.