Amazingly the Senate voted down a measure today to the Financial Reform Bill which would have required home buyers to put down at least 5% when taking out a home loan. That's right just 5% down, not 20% that used to be the norm and is what is required in Canada. Again, the Democrats voted down 5%.
The Senator who tried to get this passed was told by the party in power and community and housing advocacy groups that the 5% requirement was too draconian. Wow , as Ronald Reagan once said in another context, "There they go again". I know he may not be the best guy to quote, but this travesty just cries out for a great quote from someone.
So it looks like when things get better, lenders will start making bad loans again. I believe they already are; I saw a recent ad for home loans with only 3 1/2% down.
Will we never learn?
As I wrote in my last post, if bad loans weren't allowed to be made all of this other financial reform stuff won't really matter all that much. However,the Democrats have chosen to go the other way. Allow bad loans and just try to "cushion " the fall out to the economy when they fail. I think there is joke there somewhere about "turning the ladder, instead of unscrewing the light bulb".