While Nancy Pelosi and Barney Frank hold Press Conferences claiming the Republicans won't modify the bad bankruptcy bill to enable renegotiation of bad primary residence mortgages.... and Barney Frank claims the Paulson plan is the only plan that can pass in some modified form....

Other economists are writing up their own alternative plans and posting them online.

A few are reposted here.

Bill King's Plan

Premises

• The US credit system is broken.
• The Paulsen-Bernanke Bailout Plan does not insure that those banks and brokers that receive bailout aid will increase lending. The reality is the market is hoarding liquidity and these banks are likely to do the same. More importantly consumer lending has been a small, often insignificant part of their business. They made money by trading and through securitization of debt.
  
• It is necessary to create a new system parallel with the existing dysfunctional system in order to mitigate the inevitable economic and financial damage and to facilitate, as seamless as possible, the transition to a functioning financial system or new model of credit and banking.
  
• The Wall Street model, securitization and extreme leverage, is obsolete.
  
• US financial institutions need to recapitalize.
  
• Hank and Ben assert that it is paramount to keep credit flowing to consumers; the bail out is a necessary adjunct.
  
• Paulsen and Hank’s bailout plan is tantamount to bailing out Univac, Digital Equipment, etc, in the eighties, which would’ve retarded the development of Dell, Microsoft, Intel and other nascent technology companies.
  
• It’s wasteful & foolish to put more money in an obsolete non-functioning system
  
• Big banks and brokers made most of their earnings over the past several years in trading, not consumer lending. And now their derivatives are THE problem
  
• If you want to get money to the consumer: the less middlemen, the better.
  
• Decentralization of liquidity, lending and risk is necessary to refurbish the financial system. The illiquidity of a few large banks is collapsing the system.

Basics of the King Report Bailout Plan

• Directly recapitalize banks by the US government allocating $500 billion into a plan for community-type banks to increase their capital in partnership with the government.
  
• The government would match existing or some percentage of existing bank capital. If it would be better, a separate bank could be created. Place a limit of say $1 billion per bank.
  
• This would create $5 trillion of credit at conservative 10 to 1 leverage. This is more than the entire private mortgage market. It is a much better use of capital instead of absorbing $700 billion of losses with no means to discern resultant credit creation.
  
• Give the banks a tax rate of 15% on consumer and commercial lending for 5 years and the right to buy out the government share of the operation at some premium.
  
• Only banks that meet some metric, like a Texas Ratio of 50, are eligible.
  
• To help the big banks, allow them to create a consumer & commercial lending facility with the 15% tax rate benefit. This should entice private equity and sovereign funds as well as Wall Street remuneration that was garnered over the past decade or so.
  
•  Prohibit trading, especially derivatives, in consumer & Commercial lending operations. However pure hedging would be allowed.
  
• Immediately increase FDIC-insured bank deposits and money funds to $1 million per eligible account.

Further considerations

• Foreign banks in the US could be included if they have respective funding from their government.
• The real estate problem is due to the fact that American incomes do NOT support current prices. Easy credit allowed them to purchase homes they couldn’t afford.
  
• Any solution to clear the real estate market must entail hiking income, which is very difficult, or allowing prices to drop to levels that the average American can support. This helps average Americans, not the big banks and investors stuck with overpriced mortgages.
  
• No bailout for the imprudent and reckless but a means to directly help Americans and procure capital from private and sovereign sources because a new financial system must be implemented.
  
• This is not likely to be the final model but it is a stop-gap measure that will resonate with average Americans. It’s a way to connect with Middle America because it benefits them directly and is not an exclusive Wall Street bailout.
  
• The cause of our current financial morass is Big Government + Big Business = Crony Capitalism + Funny Money = concentration of wealth and risk + declining US living standards.
  
• The solution is decentralization of the financial system, like the tech industry, which will lower systemic risk, foster competition and yield better ideas, services and companies.

Lucian A. Bebchuk's Plan and Working Paper

1. The Treasury should only buy troubled assets at fair market value. 
2. The Treasury should be allowed to purchase, again at fair market value, new securities issued by financial institutions needing additional capital.
3. To ensure that asset purchases are made at fair market value, the Treasury should buy them through multibuyer competitive processes with appropriate incentives

In more detail ,  Bebchuk declares underlying  principles of a bail out:

1. No overpaying for troubled assets: The Treasury’s authority to purchase troubled assets should be limited to doing so at fair market value.
2. Addressing undercapitalization problems directly: Because the purchase of troubled assets at fair market value may leave financial firms severely under-capitalized, the Treasury’s authority should be expanded to allow purchasing, again at fair market value, new securities issued by financial institutions in need of additional capital.
3. Market-based discipline: to ensure that purchases are made at fair market value, the Treasury should conduct them through multi-buyer competitive processes with appropriate incentives.
4. Inducing infusion of private capital: to further expand the capital available to the financial sector, and to reduce the use of public funds for this purpose, financial firms should be required or induced to raise capital through right offerings to their existing shareholders.

Roubini HOME 10 Step Plan

1. First, like in the Treasury TARP plan you need to buy illiquid/toxic assets and take them off the balance sheet of banks and financial institutions to reliquify them and allow new credit creation.
   • The biggest problem here  is one of the proper valuation and the proper price
2. In exchange for the purchase of illiquid asset  the government gets preferred shares.
3. Inject further public capital in the form of preferred shares in the financial institutions.
4. Existing shareholders of the banks need to take a first-tier loss to minimize the risks for the government share.
   • Suspend dividend payments.
5. Convert some of this unsecured debt into equity.
6. Let other insolvent banks and financial institutions to go bust and disappear.
7. Failed banks go to the HOME.
8. A HOLC-like program for debt reduction of the household sector.
9. Change of the Basel II capital adequacy ratios.
10. Start implementing rapidly a reform of the system of regulation and supervision of financial institutions in a world of financial globalization.

Mother Jones has a list of other alternatives and the reasons they will not work.

There seems to be a very common thread coming to consensus on these alternative plans.  My take of the best ideas to date:

• Key is the pricing and exposure, timing of that exposure of bad assets.  Do this wrong and it could exacerbate the situation. 
• A key missing element is a HOLC and the ability to renegotiate from the bottom up, household debt and bad mortgages.  Build a new house on Sand....
• Final key is to not let further bad banking practices continue.

This WSJ Shiller Interview also confirms one of the major issues is the pricing of these assets which the Treasury Secretary is proposing to buy:

One thing is certain, after these closed door deals are finalized if Congress doesn't realize they need to release every detail to the public before voting.....this country just might revolt.  The rage is churning.