Money set aside for Fannie and Freddie — to help the GSE’s can reduce the mortgages of underwater homeowners who can no longer afford their payments — should be used to reduce the national debt, rather than to help struggling homeowners, according to two U.S. Senate Republicans.

Senators David Vitter (R., La.) and Jim DeMint (R., S.C.) sent a letter to Treasury Secretary Timothy Geithner, arguing that allowing struggling homeowners to lower their debt would convince non-struggling ones to default as well — in effect, to take the hit to their credit ratings in exchange for a lower mortgage.

The Obama Administration and Democrats have been pressuring the Federal Housing Finance Agency to allow debt forgiveness for homeowners who A) have homes worth less than their mortgages, and B) are behind on their payments.

Without debt forgiveness, the argument goes, banks will likely end up foreclosing on those properties, adding additional REO homes to the market and vacant homes to communities … and those banks will end up getting less money in the long run, anyway (while forcing families from their homes).

In fact, a Brookings Institution report, “The Ongoing Impact of Foreclosures on Children,” found that “more than 8 million children are directly affected by the ongoing foreclosure crisis” by losing their homes. Some become homeless; many are forced to change schools Gross public debt since 1790and move away from friends. And higher rental rates mean that families who

Except for a respite in the mid-to-late 1990s, the US national debt has been rising steadily since the early 1980s, thanks to a combination of tax cuts and increased spending. It currently stands at about $15 trillion.