Congress should instruct the U.S. Treasury to issue to each American household a mortgage reduction voucher worth $7,500. There are about 100 million households in the U.S.A., so the total cost would be roughly the same as the proposed bailout of Wall Street investors and banks. Because these vouchers could be used only to pay off mortgages, these funds would greatly alleviate the current financial crisis which was caused by people being unable to make their payments. Thus, these vouchers will help the banks by helping the people, rather than hoping that by saving the banks the people will be bailed out. Think about it as trickling up, instead of down.
One may ask, why issue these vouchers to people who have no mortgage? For fairness' sake. Given that that the Congressional bailout is using tax payers' money, all tax payers should benefit from the program. People without mortgages could either use their vouchers as part of a down payment for a house--thus helping restore the housing market to good health and stopping the downward spiraling of the price of houses, one of the causes of the current crisis--or they could sell these vouchers to others who could use them to further reduce their mortgages. (That is, these vouchers should be tradable.)
Democrats should love these vouchers because they benefit all of us, and not primarily those who own shares in irresponsible banks or the banks' reckless management. Republicans should love these vouchers, as they are akin to the school vouchers libertarians have long favored on the grounds that such vouchers leave the choice to each individual. Indeed, people can use these vouchers to pressure their banks to renegotiate their mortgages and provide more favorable terms--lest they take their vouchers to another bank, get a better mortgage from it, and pay off the old, unfavorable one.
The main criticism against this idea will be that issuing such vouchers takes time, and the financial crisis is at the gate if not in the gate. However, like the 2008 stimulus checks, which were issued within a few weeks, mortgage reduction vouchers could be issued in a jiffy. Moreover, the firm knowledge that $750 billion dollars are about to be injected into the system is likely to suffice to keep afloat the financial institutions. And, if this sum is not large enough, instead of increasing the bailout to the banks, let's up the people's mortgage reduction vouchers.
Amitai Etzioni is a University Professor at The George Washington University, and the author of The Moral Dimension: Toward a New Economics. He can be reached at comnet@gwu.edu.