Reducing the Principal of Underwater Home Mortgages

I see today in a widely respected newspaper an editorial referring to home mortgages, calling for "reducing principal balances for millions of people who owe more on their homes than they are worth." That would likely require hundreds of billions of dollars. Who, pray tell, should pay for this program? The banks, whom we've just bailed out? The taxpayers themselves, who are already incurring record deficits? Should principal reductions apply irrespective of the size or value of the home or its suitability for the owner's circumstances? Should it be public policy of this nation to protect people from the unfortunate circumstance of a decline in the value of their property? Where might this lead? Should it be an ongoing policy, or just a one-time thing? Should we consider additional reductions if the property value keeps falling? Should it apply to personal property as well as real estate? Should it be extended to include circumstances in which the property was overvalued and thus in a deficit position when the property was initially encumbered? And who is to make the determination as to what the value of the property is? Wouldn't it be more prudent to encourage people who can't afford to hold on to their homes to trade down or rent until their circumstances vis-a-vis the market improve?