The lesson of history...

...is that man never learns the lesson of history. A friend read my blog about the credit card fiasco, recognized the bank and sent me a promotional letter he received from them last month. It was astounding enough for him to save it.

It was selling mortage loans with these features (and these are direct quotes from the letter):

"Up to 105% loan-to-value ratio...for instance, if your home is worth $100,000..." (I won't keystroke their entire example here, but if you have to explain that 105% of 100,000 is 105,000, should you be making a loan to that person for greater than property value?)

"No appraisal required on most single-family homes"

"No minimum credit score" (I will repeat, these are direct quotes.)

"Interest rates are at record lows"

And finally, drum roll please: "No employment, income or asset verification required"

My friend thought there might be a scam afoot, with someone replicating the bank stationery. So, he called. Nope, it's legit. It's part of the new stimulus package. Since the bank accepted federal bailout money, they are obligated to offer these terms, congruent with the Making Home Affordable Program.

Let's see, the government previously compelled banks to make high risk loans, which blew up in everyone's face and helped precipitate a financial crash. So, the solution is that you take money from productive taxpayers (who might've otherwise spent it on goods and stimulated the economy), give it to banks and require them to make even riskier loans?

I'm not seeing a lot of learning here. Then again, it probably has little to do with economic stimulus.