I've been busy, but I didn't create the financial crisis...

So, you've probably heard about this impending crisis, and they bailout. We pay some amount to buy debt and nationalize companies who were too leveraged to live. When I worked at Sowood, no one bailed us out, we lost a lot of money and then returned what we could to the investors. So we're going to buy crappy mortgage backed securities (MBS) so that financial firms don't have to have them on the books - all with your tax dollars. Hmmm.... sounds like the financial firms get the sweet deal. Here is my alternative, but first a quick lesson on MBSs:

An MBS is basically a pool of mortgages that get put together and then you can buy certain amount of this pool, just like a bond fund. Since the value of this security is based on the payments (mortgage payments by you and me) when the likelihood of default goes up, the value of these go way down. If there is a default, the security is worth little to nothing. This is oversimplifying to a point, but that is the basic idea.

Some sources say this is going to cost 700 BILLION dollars, sooooo rather than using this to buy the MBS, which is basically distressed debt, why don't we give it to the people who took out those loans in the first place? Follow these quick and easy steps:

1) Sub-prime loans were made, securitized, and are now held by many financial institutions. When the risk of default goes up (which is has), those institutions have to write down the value of those securities, taking a loss.
2) Those financial intuitions are all linked to one another and as the start to write down and make margin payments and so on, they run out of money to make payments and profits, so they turn to the gov't to bail them out.
3) The gov't should say, "No Way. You lobbied for lax regulation, exemptions from leverage requirements, and kept it up rather than being responsible. The American people shouldn't pay for your mistakes. But because of this, they are hurting, so we'll help them."
4) The gov't takes 700 Billion and pumps it back to people with mortgages, people in foreclosure, and people who were the source of the sub-prime loans in #1.
5) Those people take that money, and pay their mortgages, the rest is put in a national trust for those same people so they don't spend it on a new Hummer or Flat screen TV. Credit card debt should also be paid as that can be securitized as well and probably will default after the MBS do.
6) The people (with the mortgages) start to make consistent payments on their mortgages. These payments, plus the national trust, will lower the default risk of the securities and raise the value.
7) The financial firms will have value added to the books and will not be forced to increase their capital requirements with money they don't have.
8) Strict regulation about capital requirements, OTC derivatives, a new Swap exchange, and other will be created.
9) Main Street will keep their homes, and be able to pay them off.
10) Wall Street will keep their companies and their values without layoffs and a reduction in their lifestyle (well, some reductions, but boo-hoo).

How's that? Rather than helping the huge companies, why don't we help WE THE PEOPLE.