The world’s financial system is as weak now as it has been in many decades. Federal Reserve Chairman Ben S. Bernanke has a huge problem on his hands: a very wide-ranging credit freeze up surrounding financial institutions. This is a problem that mere cuts in interest rates cannot cure.

The exceptionally low interest rates of the early and mid-2000s and the continual bailing out by Alan Greenspan of any Wall Street player that got into trouble created enormous temptations to speculate with borrowed funds and throw caution to the wind, completely ignoring risk. Why worry about risk when it’s not your money and even if you get into trouble you can get bailed out? This problem is called moral hazard.

Now there’s a problem. Those speculative derivatives do not have the value that the Wall Street salesmen claimed they had. There’s a desperate race to de-leverage at almost any price. Of course, buyers have grown scarce. No institutional investor wants to add more highly overvalued speculative package to his portfolio now that the true value of these packages is exposed in the light of day. We are in a liquidity crisis the magnitude of which we haven’t seen since before World War II.

Commercial as well as investment banks are sitting on overvalued assets such as mortgages and private equity loans they cannot sell due to being packaged with derivatives of very questionable value. This is a nice way of saying that Wall Street lied about the value and has overpriced them by billions of dollars. Basically this means that they do not have the cash to make new loans and this is killing our credit based economy. For banks and brokers to make their balance sheets stronger by de-leveraging the banks would need to reduce the number of loans on their books. Doing this would overwhelm the economy and turn a bad recession into a long lasting depression.

This is why the Federal Reserve is bailing out banks with long term financing at low prices. What other option is there? Either let the entire financial infrastructure of the world freeze up or they lend money to financial institutions and accept the subprime mortgages and related securities of debatable value as collateral. This is how the Federal Reserve has become the buyer of last resort which is incredibly inflationary. These financial middlemen are projected to take the cash borrowed from the Federal Reserve and lend it out again to higher quality borrowers; unfortunately this is not what is happening. Theoretically, this would be considered the trickle-down effect.

So why don’t we try a trickle-up effect? The bailout will cost at least $1,000,000,000,000. Not sure of that number? That would be one trillion dollars! Instead of giving one trillion dollars of newly created money to the Wall Street players to continue the financial problems we already are facing, why not give that money to the people of America? It will then trickle-up to the Wall Street by stimulating the economy. By giving around $3,200 to every individual in America we may be able to get the money flow back in the right direction. This would mean a family of five would receive $16,000.

This would help all of America individually as well as the economy. First time home buyers would actually have enough for a down payment, thereby helping the real estate crisis. In doing this everyone is helped instead of a few Wall Street fat cats. Why is it they should receive a trillion dollars of new money to throw around and devalue like they have in the past? After all, Wall Street's abuse of derivatives and outright greed is what got us into this financial crisis in the first place.