It is hard to describe the incredible incompetence of Nancy Pelosi, Harry Reid and Barack Obama.  Just before congress recessed a bill was passed in both the House and the Senate that would have permitted the streamlining of loan document processing when banks are foreclosing on homes.  This passed by voice vote in both chambers with no opposition.  But, President Obama killed the bill, after a self-righteous proclamation, by refusing to sign it into law.

The obvious incompetence of Nancy Pelosi and Harry Reid in letting this “controversial” bill pass on a voice vote is impossible to ignore.   Obama made this worse by making sure everyone understood why he was not going to sign the bill.  Democrats gained nothing from this as what little political gain received by Obama is more than offset by the damage to Pelosi and Reid.

But the real damage is that this bill just guarantees more delay in the recovery.  No one expects any change in whether or not a home eventually gets foreclosed.  All that will happen is that it will take longer and it will be more expensive.  In the meantime, the immediate impact on the economy could be catastrophic.   Lawyers are already poised to take advantage of this mess.  You can expect class action suits by skilled attorneys challenging every foreclosure that happened in the last two years.  That means those people who bought foreclosed homes may now have to incur legal expense to prove they really own the home.  In the meantime, sales on foreclosed homes have already come to a screeching halt:

http://www.washingtonpost.com/wp-dyn/content/article/2010/10/08/AR2010100806954.html

This means recovery in the housing industry will be delayed indefinitely.

I have no sympathy for the banks that got themselves into this mess by irresponsible lending practices.  It is also hard to feel sympathy for those people trying to buy homes at bargain prices, since any gain has probably come at someone else’s expense.   There are no heroes in this story.  But, we are either a nation ruled by laws, or we aren’t.  No economy can prosper in the face of such widespread legal uncertainty. 

No bank will be interested in loaning money for someone to buy a home, if they cannot protect their investment if the borrower stops making payments.  Banks loan money because the loan was protected by the security in the property.  If that security is not there, the only people who will be able to get loans will be people who don’t need to borrow money.

This pocket veto may do more damage to our economy than you can imagine.

 TDM