What I would do about the current economic crisis

I would do what Henry Paulson said he was going to do and did not do, and what still has not been done.

I would create a program to buy the unsalable toxic assets of the banks--mostly collateralized mortgage packages that contain an unknown amount of sub-prime mortgages that cannot be valued. I would buy them at an amount greater midway between their salvage value (8-10 cents on the dollar) and their face value--around 60 cents on the dollar.

I would place them in a fund where, as those mortgages that were sound were paid off, the money could accumulate to repay the government for their initial investment. In the long run (10-15 yrs.), I think the entire cost could be amortized, so that the program would cost the government nothing.

Many banks are resisting the sale of these assets. Some still hope this crisis will be short (4-5 yrs) and they can recoup their investment. More are unwilling, by revealing how much of these assets they have, to reveal how stupidly they behaved during the real estate bubble. I would use the regulatory authority of the government to compel a sale.

From the beginning, the current problems have been caused by the toxic assets that are weighing down the banks and destroying their ability or willingness to lend. Everyone has said this, yet no one seems willing to do anything about it. They remain there, month after month, the recession drags on month after month. We create programs to deal with the consequences of their effects, but we do nothing to deal with the cause.