I still don't understand why the wouldn't just give troubled homeowners lower interest rates based on the owners ability to pay. It may not allow banks to earn top dollar, but it would allow them to make back their money and inject more money into the bank for lending. As a part of the agreement, tell the owners that if they walk away from it then the impact on their credit will be as if they were still under their original mortgage agreement.

Secondly, if you really must hand out money then hand it out to the people. It seems to me that debt is a large part of this problem. So, why not let people use the money to pay off debts such as a mortgage payment or two. Once again, that would inject money into banks to use as capital to begin lending again.

Lastly, cut payroll taxes. Specifically, federal withholdings; FICA; and FUTA taxes. This would free up not only more money for the employee to spend, but also for the employer to spend or use to shore up losses.

At least, that is how I'd do it.