San Bernardino, Calif., is bankrupt, under criminal investigation, and now county officials are considering a plan to use eminent domain powers to “seize and refinance” underwater mortgages, according to the Washington Free Beacon’s Andrew Stiles.
Put forward by investors with ties to the Democratic Party, the proposal has been met with opposition by critics who claim it is both a violation of
property rights and “an exercise in political cronyism.”
“This is a group of folks who want to come in and use the government to help acquire properties for them and provide an impressive return on their investment,” Steven Greenhut, a senior fellow at the Pacific Research Institute, told the WFB.
What, exactly, is involved in the plan? Stiles explains:
The county, along with the cities of Ontario and Fontana, has created a joint authority to consider a plan to restructure mortgages for certain borrowers who are “underwater,” meaning they owe more than their homes are worth. Officials estimate that as many as 100,000 mortgages in San Bernardino County are underwater.
The new authority would apply eminent domain power, which allows governments to forcibly acquire private property for public benefit. However, rather than seizing the physical properties in this case, the authority effectively would be purchasing the mortgages owed by the property owners, with the aim of restructuring them and selling them to investors who could then turn a profit by flipping the homes.
A San Francisco firm called Mortgage Resolution Partners (MRP), which is closely tied to the Democratic Party, is one of the major parties involved in the plan.
“The firm’s chairman, Steven Gluckstern, has personally donated more than $160,000 to Democratic candidates and committees since 2000, including $7,300 to President Obama,” Stiles reports. “Gluckstern also bundled between $200,000 and $500,000 in donations for the president in 2008.”
“Gluckstern previously worked for Obama-ally Warren Buffett as general manager of the billionaire investor’s Berkshire Hathaway Insurance Group,” he adds.
Of course, as promised, there are also ties to the one and only billionaire, philanthropist currency speculator George Soros.
“BJ Greenspan, the firm’s chief of staff, joined MRP after a stint at the Institute of New Economic Thinking, an organization founded and funded by billionaire financier George Soros [emphasis added],” writes Stiles.
Former California state treasurer Phil Angelides, who in 2009 was tapped by then-House Majority Leader Nancy Pelosi (D., Calif.) to lead a federal investigation into the causes of the financial crisis, served as executive chairman at MRP until earlier this year.
Angelides stepped down from his position in January after Reuters reported on his role and revealed a letter he sent to prospective investors, in which Angelides detailed the MRP strategy to use “legal and political leverage” to acquire underwater mortgages and resell them at a profit of up to 20 percent. Angelides referred to the firm’s political connections as its “secret formula” in the letter.
Officials argue that the controversial plan will save homes in danger of foreclosure and that it will help raise tax revenues. Still, critics attack the constitutionality of the plan.
“This has never been tried before,” said Dana Berliner, litigation director for the Institute for Justice. “Most states would prohibit this kind of taking under state constitutional law, including California, where they’ve never allowed eminent domain to benefit private parties.”
The San Bernardino plan is a “blatant attempt by one group of investors to steal money from another group of investors,” Berliner told the WFB.