Eminent Domain - Answer to Banks Fraud of Home Loan Schemes - Foreclosures

Desperate for a way out of a housing collapse that has crippled the region, officials in San Bernardino County … are exploring a drastic option — using eminent domain to buy up mortgages for homes that are underwater.

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Cities and towns won’t need to ask for an act of a bank-subsidized congress to do this, and they won’t need a federal judge to sign off on any settlement. They can just do it. 

In the Death Star of America’s financial oligarchy, the ability of local governments to use eminent domain to seize toxic debt might be the one structural flaw big enough for the rebel alliance to exploit.

Instead of letting everyone be slowly ground into dust under the weight of all of that debt, the idea behind the use of eminent domain is to pull the Band-Aid off all at once.

The use of eminent domain is obviously an extreme reaction. But the moral argument for its use is clear here.

Virtually every community in America was the victim of a broad fraud scheme perpetrated by banks, lenders, ratings agencies (and, yes, even the GSEs like Fannie and Freddie) to artificially inflate the real estate market. 

The people who bought houses at the peak of the market and are now underwater, they are victims of a crime, the crime being a conspiracy by banks, lenders and ratings agencies to misrepresent the value of home loans (particularly subprime loans) to the bondholders who bought them. 

The damage from that criminal scheme is not just ruining and bankrupting the homeowners who bought these artificially-inflated properties, it's also destroying neighborhoods and paralyzing the whole economy.

So it's absolutely appropriate for local governments to use the powers available to them to try to undo the damage, aid the victims, and help restore neighborhoods. How exactly they get there is negotiable, but it's definitely intriguing to see them trying.