Saving The Economy Fighting Door-To-Door

The populist notion that has come out during the current Capitol Hill hearings on the Paulson plan is that part of the $700 billion rescue package should go directly to the homeowners who are having trouble paying their mortgages, losing their homes due to foreclosure or facing bankruptcy.

There is nobility in this thought of helping the average man, but its practicality is beyond the reach of even a large government.

This bailout is based on the premise that attacking the credit problem in only a very limited number of banks will free up capital and that this will free up enough capital to increase to lending to both companies and individuals. The rush of credit will help homeowners increase their borrowing or allow them to get money at better rates. The program probably has a number of flaws, one of which is that banks may decide to take government funds and then not pass them on to the financially needy.

The alternative being proposed by some politicians is that this unprecedented aid package can be used to solve the problem of failing individual mortgages held by millions of Americans. A portion of these people who are having trouble making the note would get money so that they do not fall behind and have their homes slip into foreclosure. From a humanitarian standpoint, it has appropriate bona fides.

How the backers of the idea of helping legions of mortgage holders propose to handle the mechanics has not been devised because it will never work. Even the federal agencies which would implement such a program do not have the tens of thousands of people who would be necessary to support a granular solution. Leaving it to the banks is giving it back to the institutions which began the mess in the first place. In short, there is no way to handle a system for identifying those who need and deserve aid and separating them from deadbeats and charlatans.

Writing checks to large banks that need to rid themselves of bad mortgage-backed paper may do little or nothing to save the credit system. The jury will be out on that for months.

The idea of saving the system one home at a time suffers from colossal impracticality.

Douglas A. McIntyre