There is no shortage of proposed solutions to invigorate the sluggish economy but one that I find most perplexing is this recurring idea that we should reduce the mortgage principal of people whose houses are underwater.   This troubling idea has even been proposed by the NY Fed President as mentioned in this NY Times article.  I agree that overleveraged consumers are a drag on economic growth.  I also suspect that housing mortgages are a large part of that but why in the world would we “bail out“ individuals who made bad economic decisions?  Too big to fail?  I doubt it.  What about other sources of debt, student loans, car loans, business loans, credit cards, etc.  Why wouldn’t those people be entitled to debt relief as well?  Do we really want yet another subsidy targeted only to homeowners?  And why does the simple fact of your house being underwater mean your should have your debt reduced? I’ve got some stocks I’ve invested in that are “underwater” in the sense that they are worth less than I paid for them but I haven’t heard anyone suggest I should somehow get free money or transfer my loss onto the back of taxpayers.  In many cases these homeowners can still afford their mortgages. They just don’t like the idea of continuing to make payments on what turned out to be a bad investment, but who does? Why should they be blessed with an economic windfall and not every otherUScitizen?  What about the terrible precedent this would set?  What about the vast majority of homeowners that didn’t get in over their head?  Why should they pay for the mistakes of others?  I feel like sending my credit card statement to the next official who suggests mortgage principal relief and ask them for credit card debt relief as well.