Our Most Powerful Weapon Against Wall Street? The Rise of Reverse Eminent Domain

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http://www.alternet.org/economy/our-most-powerful-weapon-against-wall-street-rise-reverse-eminent-domain



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How Communities are Fighting Back using "Reverse" Eminent Domain

Richmond, California is facing the full brunt of the housing collapse. The average value of its homes has declined by 50 percent. Foreclosures and vacant houses blot its neighborhoods. The costs of policing and collecting garbage from vacant homes has increased. It was time to take action.

With the help of seasoned activists led by Alliance of Californians for Community Empowerment, (ACCE), Richmond turned to the power of eminent domain which permits government entities to claim property for legitimate public purposes as long as they pay fair market value. Often this process removes people from their homes in order to create economic develop projects and transportation routes. Not so in Richmond where the properties in question are mortgages, not homes, and the homeowners remain in their homes rather than being removed. Richmond wants to acquire several thousand underwater mortgages – beginning with more than 600 - by paying the Wall Street financiers the current value of those mortgages rather than the inflated bubble values. After giving the mortgage lenders a fair, (determined by impartial outside appraisers), Richmond would then refinance the homes at the reduced value making them much more affordable to its residents. Richmond is partnering with a finance company that for a small profit is willing to front the money and make the new reduced mortgages. (For all the details of how this process works see an excellent recap by Mike Konczal).

Richmond's City Council, of course, would prefer to negotiate a settlement without using reverse eminent domain. They are asking the big banks and investment funds that own these mortgages to sit down with them in order to come up with a fair price. After all, the securities which contain underwater mortgages like these are being bought and sold each day at reduced values, now that they are no longer bogusly rated AAA and the real risks of predatory lending have emerged. But so far, Wall Street would rather litigate than negotiate.

Wall Street Hypocrisy

Financial giants renegotiate their loans all the time. For example, the New York Times reports (December 13) that Blackstone, the private equity giant which also is the largest U.S. private real estate owner, renegotiated billions of dollars of loans it took out when it purchased Hilton at the height of the bubble: “When they bought Hilton for $26 billion, it was like buying a very big house,” said Steven Kaplan, a professor at the University of Chicago Booth School of Business. “And they financed it like a house, taking on debt.”

[jollyreaper2112]

1. The government fighting for the little guy?

This is the kind of socialism we want in Obama's America. Too bad it's so rare. I hope Limbaugh has a coronary when he hears it.