Earlier quoted context omitted.
You are ignoring rule #1 in the financial world: "Past performance may not be indicative of future results." Don't worry, the entire financial world ignored this rule as well (which is precisely why I think this is likely to be a long downturn - rebuilding financial infrastructure is a long process involving lots of time and social work; you can't simply legislate it into being).
It seems like everyone involved - homeowners, banks, corporate executives, the government - has an incentive to drag this out, so that this quarter's results won't be as bad as they otherwise would be. (Or in homeowners' case, so they don't end up on the street.) Why take some pain now when the rewards will likely go to your successor?
Also see "livelock".