A perpetual moratorium on foreclosures, for example, would be a foolish repudiation of the rights of lenders. Who would lend after that precedent?
A lot of people want to punish the lenders. So if you follow Dean Baker's plan (now endorsed by Andrew Samwick) and let mortgage borrowers become renters, then this takes away the lender's right to foreclose on the property. Glaeser makes the point that if lenders are going to be punished whenever mortgage loans go bad, they will have to factor that into their future decisions.
I know a lot of people think that the lenders "pushed" these loans on borrowers, but the Baker plan is not the punishment that fits that particular crime. The "pushing" crime would be taking a borrower who has built up some equity in the house and giving him a cash-out refinance that he cannot afford to repay. The Baker plan is designed to bail out somebody who purchased home at the peak of the market and thus made a bad investment. Shifting that sort of market risk from borrowers to lenders is a dubious policy.
Glaeser goes on to suggest some variations on the debt-equity swap idea. Obviously, he came up with the idea independently. But the reader who followed the link from Greg Mankiw to Glaeser emailed me with a subject line "your idea."