Comments on: Banking and finance roundup http://overlawyered.com/2014/06/banking-finance-roundup-18/ Chronicling the high cost of our legal system Mon, 27 Apr 2015 02:22:33 +0000 hourly 1 http://wordpress.org/?v=4.1.1 By: Walter Olson http://overlawyered.com/2014/06/banking-finance-roundup-18/comment-page-1/#comment-293369 Thu, 26 Jun 2014 18:26:28 +0000 http://overlawyered.com/?p=46578#comment-293369 If the enormous public backlash to Kelo and Poletown had any point, it was to reinforce the idea that eminent domain is abuse when it goes beyond condemning property for truly *public* use (such as the route of a newly built road, or land needed for national defense) and instead grabs someone’s property because someone covets it for a *private* use primarily devoted to the enrichment of Mr. A or Company Z.

Are we even talking about the same scheme of getting cities to condemn underwater mortgages by eminent domain? Of course that scheme could gain the *homeowner’s* consent or invitation; it’s not the homeowner who’s being compelled to give up a property right, it’s the lender to whom she or he owes money. The whole idea of using eminent domain to seize underwater mortgages is to grab the lender’s property against its will and without its consent for the quintessentially private benefit of the homeowner and other private parties. I’d call that abuse, not “public use”.

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By: DensityDuck http://overlawyered.com/2014/06/banking-finance-roundup-18/comment-page-1/#comment-293362 Thu, 26 Jun 2014 17:44:08 +0000 http://overlawyered.com/?p=46578#comment-293362 Yes, I am aware of Kelo. Are you really claiming that because eminent domain was abused once, that therefore all eminent-domain activity is always bad?

The whole point of this is that the banks who hold the loans are saying “well, we say that you owe us so-many dollars, but we also say you can’t renegotiate the terms of the contract because the underlying property is worth less-than-that dollars”, and the municipalities are saying “okay, we’ll take you at your word when you say the properties are worth less-than-that dollars”.

You’re also using an inaccurate, loaded term when you say “abuse”. That implies that this is an involuntary action taken without the actual homeowner’s consent or invitation, for the sole benefit of a private third party, and that is entirely not what is happening here.

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By: Walter Olson http://overlawyered.com/2014/06/banking-finance-roundup-18/comment-page-1/#comment-293157 Wed, 25 Jun 2014 19:44:51 +0000 http://overlawyered.com/?p=46578#comment-293157 You write as if the use of eminent domain power to further the interests of private actors had not been tagged as abusive until this case. On the contrary, a search on “Kelo” yields a huge literature in which libertarians (and liberals and conservatives too, for that matter) object to eminent domain seizure for private uses as improper:

http://www.cato.org/search/results/kelo

Note that in the Kelo case, as in the more recent underwater mortgage schemes, some argued that seizing for private use really amounted to seizing for public use if looked at in the proper light because the goal, revitalizing a depressed city as a whole, would lift all ships.

You’re probably right that it’s no refutation of a position to note that someone is making a buck off it, but then maybe we can dispense with the snark about how a supposed inconsistency (which isn’t a real one) is somehow explainable by bankers being on one side but not the other.

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By: DensityDuck http://overlawyered.com/2014/06/banking-finance-roundup-18/comment-page-1/#comment-293146 Wed, 25 Jun 2014 19:04:08 +0000 http://overlawyered.com/?p=46578#comment-293146 I’m sure that someone has figured out a way to make money for themselves as part of the eminent domain plan, because nothing happens in this world without someone making a buck off of it (well, unless government came up with the idea on its own.)

My point is that it’s hypocritical to say “Uber shouldn’t be subject to taxi regulations because technically it’s not a taxi service and so the government should butt out”, and then turn around and say “principal reduction through the mechanism of eminent domain is abuse and shouldn’t be tolerated”. Either you accept creative conformance to the law, or you don’t.

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By: Walter Olson http://overlawyered.com/2014/06/banking-finance-roundup-18/comment-page-1/#comment-293123 Wed, 25 Jun 2014 16:06:37 +0000 http://overlawyered.com/?p=46578#comment-293123 Or I guess principled opposition to abuse of eminent domain (if you’re referring to the last item) or to abusive litigation built on “disparate impact” theories (if you’re referring to Providence/L.A.) extends even to cases where it’s being done for the claimed benefit of mortgage borrowers.

If it was the eminent domain ploy you were referring to, incidentally, it’s being packaged by a clever Wall Street operator and pitched to cities, so sharpsters with a financial interest are on both sides of the controversy.

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By: DensityDuck http://overlawyered.com/2014/06/banking-finance-roundup-18/comment-page-1/#comment-293122 Wed, 25 Jun 2014 15:58:40 +0000 http://overlawyered.com/?p=46578#comment-293122 Uber and Lyft and AirBnb use clever tailoring to “get around” regulation on the business activity in question, and this is seen as a good thing we should support, and government regulatory-body interference is a nasty awful thing we should all be mad about.

A city uses clever tailoring to support homeowners who got suckered into bad deals, and this is seen as a nasty awful thing we should all be mad about, and government regulatory-body interference is a good thing we should support.

I guess that in the one case, bankers are making money; and in the other case it’s being taken away from them.

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