Short Sales - Why not help the homeowner???

So, the banks won't give the homeowner a loan modification, so they have them do a short sale.  They write off tens (or hundreds) of thousands of dollars and pay the homeowner to vacate the property.  Their credit is shot for 2-3 years at a minimum.  My question:  why don't the banks take the loss and let the homeowner stay in their home???  This would take a MULTITUDE of drastically reduced properties off the market, and let the normal seller sell their home for a decent price.  Comments???