10% down

In one of my first posts on this blog I advocated requiring home buyers put 20% down. In a recent post Kevin Drum argues for 10% down:

That's too much. Just as leverage much above 10:1 is dangerous in the banking system, it's dangerous in the home mortgage market too. If 10% had been the minimum down payment over the past decade, the housing bubble never would have taken off the way it did. Crazy loans would have been rare. Unqualified buyers would have continued to rent. Mortgage fraud would have been dramatically reduced. Speculation and flipping would have been dampened. Foreclosures wouldn't have decimated entire cities. The derivatives market wouldn't have reached such stratospheric heights. We still might have had a medium-sized housing bubble, but the world probably wouldn't have been on the verge of imploding last year.

While I would prefer 20%, 10% is better than nothing. Unfortunately even after the disastrous housing bubble Congress is still in the thrall of the housing lobby and seemingly unwilling to even consider sensible measures to prevent another.