Start talking about helping homeowners.

In other words, sure, Wells Fargo can change the terms of the loan-just not in the ways that make it likely that borrowers will actually be able to repay it in the long run. Other contracts are even tougher: For Countrywide to modify some of its loans, it has to buy back the bad loans from bondholders, something that mortgage companies have neither the will nor (more important) the money to do.

Without the ability to work out failing loans, financial institutions are caught in a worsening cycle. Homeowners hit with rising payments default, increasing the number of foreclosures, driving down property values, and putting borrowers even further underwater and ever more likely to miss their payments or walk away from their properties. The only way to put an end to this is to change the terms permanently in a way that makes it easier for borrowers to stay in their homes and settle their obligations. And the only one who can do that is Uncle Sam.

In fact, bailing out the people edging steadily toward default is not only charitable public policy; it is, from the government's point of view, sound financial policy as well. If the government were to buy the bad debt held by banks and other investors (including many ordinary folks' pension funds) without changing the terms of the loans, it would face exactly the problem that the investors it's bailing out do now. That would be the worst of all possible worlds and would leave the government holding $700 billion in bad debts while staring down the barrel of a worsening mortgage and foreclosure crisis.

Some people—including, at one point, the Treasury secretary—have argued that aiding people who took on mortgages they couldn't reasonably afford by any sane standard would reward financial mismanagement. True enough. But helping homeowners isn't just about making it easier for them to repay their debts; it's also about making it likelier that the government will recoup some of the twelve-digit cost of the bailout. That's something the taxpayers certainly can't object to.

(Photo of foreclosure sign by Joe Raedle/Getty Images)