(1) These people should not be rewarded for being poor investors. They bought during a boom -- at the top of the market! They're superficial, too. No one needs to buy a house. It is a luxury (or sometimes a burden) that should be enjoyed only by those that can afford it. Would people want me to be bailed out if I borrowed $500,000 in cash to invest in internet stocks in 1998 right before the bubble burst?
(2) They were trying to take advantage of the rest of us. Many of them were either speculators who hoped to turn a quick (and unclean) profit (see "flipping") or people who thought they were getting a free lunch with mortgages with unrealistic or exotic interest-rate schemes, etc. These people are line-cutters.
(3) Foreclosure is good for the market. It brings prices down! Which is what needs to happen! So that someone who isn't a millionaire will ever be able to buy a piece of property again!
(4) Tax on Prudence. Preventing foreclosures by using public funds is punishing those who didn't buy because it didn't make sense to do so. It is taking taxes from careful people to pay reckless people. It creates a perverse incentive to conduct one's finances in a risky manner.
(4) Renting is not the end of the world. Q: What happens to these poor people who get foreclosed upon? A: They have to become renters! Oh woe, what a terrible, horrifying fate. God forbid, someone who took on too much debt should have to subject themselves to paying to live in a space for a period of time. It's shaming, I tell you. It's gotta be illegal under the "dignity" provisions of some international human rights charter. Excuse me while I make sick.
Incidentally, I had the option of buying a condo right before the "housing crunch" began, and I considered it, and then realized how crushing the mortgage would be to my lifestyle.
They say the rule of thumb is that renting doesn't make sense only if the cost of the property being bought is less than 2o times your annual rent. If the government wanted to propose legislation that makes sense, it would allow protective insurance for homebuyers that qualify under this ratio (i.e., where buying makes financial sense as an alternative to renting) and certain cash-flow requirements. But they won't, because politics is an image game. And it's played with your cash.
UPDATE: Barry Rithotlz over at The Big Picture backs me up. I love legitimate validation.