'Splain this to me?

Seriously, somebody needs to explain this to me. I know I'm hopelessly stupid with regard to Economics (with the capital "E") so please make it somewhere around 7th grade reading level. Here's the question:

Why are we giving money to the banks?

See, I think it would have made a lot more sense to give tax credits to people who need help. It should be easy enough to figure out: if you have a mortgage, your bank sends you and the IRS a little slip of paper that tells how much interest you paid them last year. All we need to do is compare that paper to your gross income to see if you are in trouble. If it's over X% ("X" to be the subject of political arguments), send the guy enough of a check to reduce X enough that he can pay his mortgage. One home, one slip, one rebate. Repeat for as many years as necessary.

Now yeah, some people would get some money they don't need or deserve. Obviously that's true under the present scheme too, so that's not an argument. Some people wouldn't use the money to pay their mortgages but I think we all know that most would.

So wouldn't that take care of the banks? The mortgages get paid - yes, the mortgages are obviously less liquid now because of the real estate plunge, but if they are getting paid, so what? The knowledge that they are likely to get paid should be enough to keep that market fairly fluid.

The banks aren't in trouble because they are getting paid. We spread the problem out over 15 to 30 years so it's less to swallow for the rest of us. Every year of inflation automatically makes the number of folks needing this help less and less, saving taxpayers money. If housing markets recover and people can sell, the problem and the rebates go away then too. Isn't that all better? The whole thing might even cost us less.

It seems obvious that if $700 billion dollars is enough to "fix" the banks, then $20 or $30 billion dollars in yearly tax rebates ought to be anough to help folks pay their mortgages. Maybe it would even be less, and remember it would automatically become less every single year because houses will get sold, houses will burn down, people will die or get a better job or inherit money and inflation will eat away at the X calculation anyway making the total rebates paid smaller and smaller. These rebates obviously only apply to people who have mortgages right now and whose payments exceed a reasonable percentage of income. Some of those mortgages run out in fifteen years, some longer, but they all disappear one way or another.

Is it too simple? I'm serious, I just don't get it. Obviously there has to be a reason why this is an idiotic idea, so lay it on me. 'Splain why giving money to the banks and still letting them foreclose on the poor saps who got trapped in this mess makes more sense than giving money to the people in trouble?

By the way, I have a very small mortgage. None of this affects me directly. Just a FYI.

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