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She couldn't. That same provision is already in the 'rescue' bill that her boss endorsed.
In the rescue bill, the government is given the authority to negotiate modifications of the loans with the servicer on behalf of the borrower. Servicers are already doing this directly and voluntarily with millions of distressed homeowners (check out www.hopenow.org for details). A voluntary loan modfication, even a reduction in principal, can be a good deal for the servicer if the alternative is a foreclosure and a sale at 10 cents on the dollar. Many of the mortgages underlying the securites that Treasury will buy under the bailout are in default and will need to be modified to get those borrowers paying, so that investors will want to buy the securities and they can be accurately priced.
The difference between this and a bankruptcy proceeding is huge. First of all, bankruptcy is adversarial and once the borrower files the servicer cannot contact them directly, they must go through their attorney and the court for everything. This is very tedious and expensive for the servicer. Second, the judge has almost unlimited authority to decide what is best for the creditor and the debtor. Judges have no understanding of mortgages. Lawyers will be bringing in lowball appraisals to demand huge cramdowns of principal, they will claim "predatory lending" and ask for the mortgage to be rescinded altogether, they will demand that "teaser rates" on ARM loans be made permanent, etc.
This will be a nightmare, and could lead to over a million new bankruptcy filings within days. Anyone who is on the edge of being able to afford their mortgage or is already in default would be crazy to not file bankruptcy immediately.