Over the last seven years, many Americans have bought homes they really couldn't afford. Lowered borrowing standards attracted many buyers with no cash and/or poor credit. A lot of those people have lost their home, or will soon. Their credit ratings are now in the toilet, and that is having a negative effect on sales of large ticket items like cars and appliances.
None of the bailout proposals made public so far has addressed the problem created by these people being taken out of the market. This idea does.
Removing all foreclosures and one 30-day late payment (mortgage or other) over the last seven years from all credit scoring would bring millions of people back into markets from which they have been shut out.
Some will say that it's risky and rewarding people for making bad decisions, but it is symmetrical (philosophically, if not financially) to how the financial institutions will be bailed out.
As I understand it (and I could be wrong), the bailout isn't for the big lenders who made bad loans, like Countrywide and WaMu, it's for the institutions that purchased bundles of loans as derivatives of the original investments. As loans within the bundles fail, the bundles lose value, reducing the overall value of the institutions holding the bundles and making it difficult to borrow (and therefore lend) money.
The government will buy many of the bundles, which include good as well as bad loans, to restore value to the institutions and loosen the credit markets. As with the S&L bailout, the government will get most of our money back, because most loans are good loans. The net result for the financial institutions is that they have their good credit restored.
That's why this idea is symmetrical. It restores the borrowing power of people who have been hurt the most by the practices that led to the current crisis. Will some of these people make bad decisions (again) and eventually lose their repaired credit? Probably, just as some financial institutions will continue to make bad decisions and will eventually fail.
In both cases, it's about getting the economy going again. This idea helps the economy on Main Street as well as Wall Street. Is it THE longterm solution we need? No. But that will require more than a couple of weeks to hammer out. This is a case of making what is good for the goose good for the gander.