Bailout / Econ question. Who has this kind of brain in here?

Why won't the gov't just buy or favorably refinance the individual troubled mortgages of owner occupied homes?

Does this not solve the problem?

...such as a surtax on stock trades that the U.S. Treasury would control and payback the Federal Treasury for any and all help.

with wealth and leave nothing for programs for the middle and working classes.

:shrug:

The problem is no longer individual mortgages, but the fact that bank balance sheets have far too many liabilities. Bank assets (deposits, etc.) have to equal or exceed liabilities (debts, loans etc.), or else the bank cannot lend money. No money to lend = no credit = no investment = no growth = stagnation and unemployment increase.

Therefore, the government has to buy off these bad loans, so the banks can loan and free up money for investment.

Gross oversimplification, but that's the gist as far as I understand it.

Is that we're caught in a classic liquidity trap. Hayak (nobel prizewinning economist) described the current situation to a T 75 years ago. The Fed fixes short interest rates well below the rate of inflation and holds them there for years.. and everyone loves the early stages of a credit boom.

Easy credit leads to asset inflation which manifested as a housing boom (very credit -dependent market), soaked up a lot of government debt and kept the stock market afloat when it would have otherwise crashed (low interest rates provide support for high P/E ratios and lower dividend yields, meaning higher prices)

Easy credit also significantly weakened the dollar, created a bull market for commodities (high gas prices) created a lot of exportable debt (and a consumer economy model that enables consumption to dramatically exceed production via imports) that contributed to our trade imbalance (this is important...)

All the classic results of credit/monetary (the credit system is the only monetary system we have) inflation EXCEPT wages didn't follow prices up because of the deflationary pressure created by globalization exacerbated by our willingness to trade "freely" with slave-labor nations that have no environmental/safety/labor laws and the easy credit effect mentioned earlier.

In short, we're staring into the abyss because the liquidity bubble we've been living in is deflating and we're having trouble inflating our way out of it as monetarist economic theory believes we should because people can't afford to take on more debt.

So the government economists intend to force us to borrow $700B this week, on top of all the other money they've been borrowing in our name lately, with more to come...

It doesn't address the real problem, which is wages needing to rise relative to debt burdens, which it actually makes worse, or the root cause of the problem, which is the lack of either a market pricing mechanism for money and credit due to the fixing of short interest rates or even any recognition of the dangers of such a thing.

What about all the poor bankers and investment houses? Who's going to look after the fat cats?!