Instead of using money to bail-out the banks & developers, use the money to bail out the home-owners who are facing negative equity or significantly damaged balance sheets due to property collapse. Basically, allow borrowers to re-negotiate the terms of their loan, and write-off the delta as a bad debt paid for by the govt. This would re-set borrowings to reflect the current environment, and kick-start the economy by instilling confidence.

This post was submitted by Peter Schum.