Government Actively Using its Power for Good – Richmond, CA Mortgage Relief

Richmond, CA was one of those places incredibly hard hit by the implosion of the housing bubble. Median house prices fell over 50% and over 50% of the houses are underwater. 16% of the houses were foreclosed on, which means many, many more homeowners still live with the possibility of foreclosure hanging over their heads. It’s a disaster for the community.

But somebody came up with a plan to deal with it using eminent domain to HELP homeowners.

Richmond has proceeded by offering to purchase 624 mortgages held in private-label securities, offering a price as determined by an independent appraisal. The offer explained that they would attempt to negotiate first, but if they failed they would use their eminent domain powers.

However, in a technique argued since the beginning of the crisis by Cornell law professor Robert Hockett, rather than use eminent domain on the house itself, the city would seize the mortgage. A private investment company, Mortgage Resolution Partners (MRP), would in turn write down the mortgage amount to something closer to the current value. They would collect a profit and refinance the loan. The homeowner would be less likely to default with a lower loan amount, or would be able to sell without a short-sale, leaving him or her with more money to spend locally.

The City of Richmond would use municipal funds to buy the mortgages, keep the owners in their houses, write down the principal on the mortgages and become the mortgage holder for these houses. Of course, it won’t be easy. The banks don’t want to cooperate with an activist government. The courts, populated with those living oxymorons “activist conservatives”, may also not go along for the same reason: activist government is their enemy. 

Government getting involved to relieve people suffering from the financial meltdown that made them collateral damage? Government using its power for good, instead of evil, to serve the community and the greater good?

Yeah, it actually happens all the time, but used to happen way more and was something people believed in.

The Greatest Generation and the Baby Boomers grew up in times when government was not something to be scorned and reviled, it was the communal expression of our democracy.  It could build roads, bridges, tunnels, and infrastructure. It could defeat fascism. It could put a man on the moon. It could alleviate the suffering of citizens with programs like Social Security, Medicare, Medicaid, Welfare, Unemployment Insurance, etc. It could force school districts in the South to desegregate and pay for the education of veterans. There are innumerable positives that government (executive, legislative and judiciary) can do and have done FOR “the people” to level the playing field in the struggle for happiness and equal opportunity.

Of course, our government has had its lapses, does not always express our wishes, act to effectuate our hopes or alleviate our fears. The people we elect to wield power on our behalf also represent another less benign infrastructure comprised of big business interests, the military-industrial complex and the conflicting interests propounded by some people against “the people.” 

The modern Republican Party decided that a winning strategy was to accentuate the cynicism against government to stop government from being active on behalf of the people, which would, in fact, restore a balance of power to the powerful – the Republican natural constituency. Without a government that defends individuals, workers, consumers, that empowers unions and other associations of individuals (the Democrats natural constituency), then the already powerful have overwhelming sway over the lives of the powerless.

The argument against government is the most cynical of all because you have politicians, claiming not to be politicians, getting elected running against government, then taking a government pay check to fulfill their claims that government doesn’t work. Who does it benefit to do nothing to help people under the rubric that “government governs best that governs least?” Clearly, the already powerful benefit most. 

So Wall Street stops the re-regulation of the finance sector or the effort to institute a financial transactions tax or change the tax code so hedge fund managers pay the same rates as their secretaries. And your representative, if they don’t believe in government, helps Wall Street to derail these common sense actions, through inaction.

They don’t even have to be actively captured by deep pocketed Wall Street interests making campaign contributions to them with a wink and a nod. No, these anti-government types are a cheap date for Wall Street, or the fossil fuel industry’s climate deniers, or the prison and school privatization lobbies. Just do nothing and they win.

You don’t need big new ideas, just fight everyone else’s ideas while calling them job killers and the malefactors of great wealth have their cake and eat it too. And your cake as well. 

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