TheCity of Richmond California is threatening to use the power ofeminent domain to condemn and buy the foreclosed properties of it's
town people as a way to clean up the blight that the financial melt
down left them. Other hard hit cities are considering similar
strategies. Some, such as San Bernardino and North las Vegas, have
considered it and then backed away due to threats from financiers
claiming breach of rights with investors not receiving fair market
value and from the Federal Housing Authority Agency overseeing the
likes of Fannie Mae and Freddie Mac claiming that this sort of action
is a threat to their safe and sound operation.
Richmond
should go ahead and use it's power of eminent domain to buy these
foreclosures. It is a local solution to a scattered problem which
federal entities are actively hindering rather than solving. The
threat that a mindless too big to fail bank will ever issue a
mortgage in the city again is a godsend. That no mortgage broker
will ever darken their fair city again is a blessing. And that the
opportunity for homes in their community to be part of the world's
greatest financial fraud again is not.
The
facetious claims for individual investor's rights by the investor
class is laughable considering the fraud they perpetrated on
investors they claim to be protecting. The fair market value of an
investor's position in a bundled instrument combined with many others
in the country is difficult to determine on its face. At this level
of complexity a judicial remedy has weak legal underpinnings. That
these bundles were incorrectly priced by rating agencies paid to look
the other way by the very same institutions claiming to be protecting
investors is the beginning of the fraud. These mis-priced bundles
were then combined again to be sliced and diced into various
synthesized tranches thereby cubing the ownership complexity. There
was no real thought to protect owners rights when these complex
instruments were created so that now the only solution to this
Gordian knot is to hack it apart.
That
Government Sponsored Enterprises are part of the fraud makes the
Housing Authority's representation to vouchsafe safe and sound
operation preposterous. Government should be helping rather than
hindering by correctly analyzing that this fraud was perpetrated by
excessive concentration and abuse of financial power rather than sell
to the public the need for complexity and opaqueness. The City of
Richmond is much better served by small locally owned banks that are
a part of it's fabric. Yes, fewer mortgages would be issued, but only
to those correctly identified as credit worthy by local bankers and
not outsourced to self serving ratings agency. If a default occurs,
then there is much precedence in law to adjudicate these simple
instruments. Simplicity in market transactions is a friend of
justice while complexity is a friend of fraud. Why should government
promote fraud?
The
Pecora Commission of 1932 did much to expose the excesses of the
previous decade creating the ground work for the Glass Steagall
Banking Act of act of 1934. The Dodd Frank Bill, on the other hand,
was written before a similar commission ever got to discovering the
excesses of the 2008 financial calamity. The result is a two thousand
page document at risk of further influence by lobbyist of the banking
industry. That morass of legislation would be effective and
beneficial to our economy if it were reduced to just one article with
two sentences. No financial institution can have claim to assets
greater than one tenth of one percent of Gross Domestic Product. If
they do, then they are to spin off into as many unrelated companies
as necessary to reach the correct level. The spirits of Andrew
Jackson and Teddy Roosevelt would consider it worthy of consideration
as an Amendment to the Constitution.
