Alternative to (Mis) Using the Taxpayer Money

So the US government planned to launch probably the most expensive bailout ever by buying up the distressed mortgage to rescue the economy.

But Luigi Zingales of Chicago has different idea:

As during the Great Depression and in many debt restructurings, it makes sense in the current contingency to mandate a partial debt forgiveness or a debt-for-equity swap in the financial sector. It has the benefit of being a well-tested strategy in the private sector and it leaves the taxpayers out of the picture. But if it is so simple, why no expert has mentioned it?

The major players in the financial sector do not like it. It is much more appealing for the financial industry to be bailed out at taxpayers’ expense than to bear their share of pain. Forcing a debt-for-equity swap or a debt forgiveness would be no greater a violation of private property rights than a massive bailout, but it faces much stronger political opposition.

I think it's a worth-to-consider proposal to save capitalism and prevent the US to become the USSRA.

HT: Marginal Revolution