The US Treasury (taxpayer, owned by We the People) would make the (bad) loan (to the subprime snake).
The private Federal (sic) Reserve (sic) would collect the interest only loan for the first 5 years.

So you want to subsidize bad loans to speculators and subprime borrowers, with interest only for the first 5 years, going directly to the PRIVATE federal Reserve?

Freddie and Fannie already do that and they are broke. Yeah, open a new line of credit for the defaulters.