Democrat Congress votes to worsen credit crunch

Is there a risk of recession? Yes, mainly because a Democratic Congress is in session and with their meddling they have a dangerous tendency to make a bad situation worse. For the credit crunch, their 'cure' for housing foreclosures is to forbid banks from making 'bad' loans: Meaning no more loans to risky borrowers. So who will refinance the variable rate loans these risky borrowers have today?

A comment from the folks at bondstreetcapital.com, who are commercial lenders:

The House passes a mortgage regulation bill. What does it mean to the commercial sector?

The newspapers are providing us with a daily dose of bad news on the housing front. We read about foreclosures, lender bankruptcies, and the usual pronouncements from our government leaders that they will bring an end to the problems by more regulation.

This column is not nearly long enough to explore all of the ramifications of this crisis. But I for one am very, very nervous about the bill that has just passed the House of Representatives regulating residential lending.
Why should I, a commercial lender, be concerned about these regulations? I believe that certain provisions within this bill (H.R. 3915) are going to cause capital to pull out of the home loan business even more than it already has, and what follows will be a credit crunch that will make the current environment look benign.

A prolonged housing crunch will send us tumbling toward a deep recession which will severely impact commercial properties as businesses fail and investors, even in the commercial arena, stop lending.

This bill, if passed in its current form by the Senate and signed by the President (who has threatened a veto,) will effectively end sub-prime lending. The very people that the bill is designed to protect will find out that no one will lend to the marginal borrower.

If there is no money for housing, how many related industries will be decimated? Look at the devastation to collateral industries already: escrows; the construction trades,; and the myriad of businesses that rely on new home sales that have already been adversely affected.

With further restrictions on the availability of funds, a recession will follow and commercial real estate lending will be hurt in the process. I am very, very nervous about this knee jerk reaction by congress. You don’t cure a leg wound by chopping off both legs at the knee.

Contact your Congressional Representatives and educate them on the impact of this bill.