After several heady false starts, Congress and the White House finally enacted a stopgap Wall Street "bailout" plan last month. Since then, with a brief bit of breathing room thereby secured, the plan has been "morphing" in various ways. These changes occur as officials endeavor both (a) to draw a bead on precisely what's causing our present financial woes, and (b) to address the concerns raised by "Main Streeters," who have been asked to finance the bailout with their tax moneys. Further development can be expected as we now transition to a new presidential administration and Congress.

Treasury originally projected its plan in late September as a "buy-up" of mortgage-backed securities said to be "clogging" the credit markets. Treasury next began speaking, in mid-October, of "buying-in" to financial institutions -- in particular, commercial banks. Injecting equity through purchases of preferred shares of stock, it was said, would make funds more immediately available for lending. And now, finally, we are beginning to hear sundry proposals directed to the real root cause of the present financial worries. That is the ongoing mortgage foreclosure crisis afflicting our post-bubble real estate markets.

It is very good news that so many at long last are looking to the foreclosure crisis and how to deal with it as a means of addressing our current financial woes. However badly needed the "transfusion" supplied by Treasury's new $700 billion might have been to keep the patient -- that is the global financial system -- alive, the fact is that the patient -- or the "public fisc" -- will continue to hemorrhage until we end the wave of foreclosures that is still under way. The only real question is how best to do that.

A bit of regrettably forgotten institutional history, I believe, supplies our answer: The best way to solve the mortgage crisis and thereby the looming global financial crisis is to instruct Treasury to work through twinned institutions we already have. These both originally were, and still are, designed precisely to deal efficiently with low-end mortgage finance and refinance. Our present woes, moreover, stem directly from intrusions upon these institutions' original bailiwick by underregulated private parties during the housing bubble years, 1996 through 2006.

I am referring to the Federal Housing Administration (FHA), working in tandem with its originally government-sponsored and recently refederalized sibling enterprises (GSEs), Fannie Mae and Freddie Mac. Treasury's "new" plan for bailout is these institutions' original, and now recently restored, bailiwick. Here is how they can be employed to address the current crisis.

First, through the now newly refederalized GSEs, purchase the "toxic" mortgage-backed securities from key financial institutions now holding them as originally envisaged by Treasury. Pay more than currently undervalued market but lower than discounted cashflow value. Then the expenditure will be recouped when mortgage-backed securities rise back to their true values. And we'll ensure that financial institutions that overinvested in the securities incur some cost, hence avoiding moral hazard concerns.

Second, through FHA, simultaneously arrange refinancing and financial counseling for those mortgagees who, owing to misleadingly packaged mortgages, are now going under. This can be done at a reasonable pace once FHA's sibling GSEs own the mortgage-backed securities. And FHA in all likelihood can effect refinancings more efficiently than judges or any new cadre of bankruptcy trustees would do. For again, it's an FHA specialty. As for less innocent parties who have "gamed the system" by speculatively purchasing homes -- even multiple homes -- either refinance those on less generous terms or let them default. Let FHA/GSEs take and resell any such defaulted properties. This too is already an FHA specialty.

We've forgotten how effective FHA and its GSE siblings were upon their foundings at the start of the Roosevelt Administration. At no cost to the public fisc they transformed us from a nation in which fewer than 40 percent owned their homes to a nation in which 70 percent do.

Since FHA remains both self-funding and best at what it does, and since the GSEs have just been refederalized, their complementary original missions can now be restored. Their mandates are clear, are constitutional and still can be more or less costlessly accomplished: They exist to spread and maintain nonspeculative home ownership on Main Street. Let them do that now and we'll save Wall Street and the global financial system as well.

Robert Hockett teaches international finance and financial regulation at Cornell Law School.