From over at Naked Capitalism–
A scheme proposed by a group called Mortgage Resolution Partners, which is being considered by San Bernardino, CA, to use the traditional power of eminent domain to condemn mortgages, was pretty certain to be a non-starter, so I’ve ignored it. But it’s gotten enough attention to have roused the ire of a whole host of financial services industry lobbying groups, as well as endorsements from Bob Shiller and Joe Nocera, and a thumb’s down from Felix Salmon, so it looked to be in need of serious analysis.
One of the big problems with this plan, which seems to have been overlooked so far, is that any municipality who goes down this path is likely to be the designated bagholder. Mind you, that isn’t based just on the general tendency of municipalities to be easy prey for clever bankers, but also based on the few, but nevertheless troubling, operational details that have been made public.
This is the theory of how the plan would work, from one of its prime promoters, law professor Robert Hockett:
Protecting the citizenry and heading off blight is what municipal eminent domain authority is for”¦And it is for them to do so in partnership with private investors
who effectively render the Plan publicly costless ““ just as we’ve done since the earliest days of our republic in carrying out and financing projects
If you believe that, I have a bridge I’d like to sell you.
MORE HERE