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The constitution explicitly permits eminent domain, provided it's for the benefit of the public. It's also clear that Wells Fargo will argue against it, becaus

The constitution explicitly permits eminent domain, provided it's for the benefit of the public. It's also clear that Wells Fargo will argue against it, because it's obviously not in their interest. Not too far from where I live is a house that Deutsche Bank took possession of a year and a half back. They haven't made any moves to sell since. The lot is overgrown, the roof will start leaking soon, it's an eyesore that's getting worse every month. A few years back I had the misfortune to rent from an absentee landlady from one of the poorest ZIP codes in Brooklyn who had bought that property at the height of the boom. The high point of the tenancy was the heating failing in early October. When the code inspector showed up I could show him the garbage that hadn't been collected for three weeks and send him down to the basement where the lady, her husband and her useless cousin had torn the boiler apart, attempting to fix it, and couldn't put it back together again. She had arranged for the plumber to come, cancelled it a day later, and then went out from Brooklyn to do this cock-up of a cowboy job. The backstory was that her bank had asserted rights the day the plumber was cancelled. The garbage was there because the garbage hauler had gone unpaid for that month. I moved out soon after, and the move was a pain. That was in 2008. The state of the house is uncertain. Lis pendens was filed in 2008, as I said, and there has been no court date until now. What I'm saying here is that unmaintained housing stock and housing stock without a clean title has real effects on the people that live in them and nearby, the public that is. You can make a good case that eminent domain is justified here. No one has done it yet, this is uncharted territory as far as the law is concerned, but it's heartening to see Richmond take a shot at it.

hga 13y ago
What the 5th Amendment actually said is "nor shall private property be taken for public use, without just compensation." Kelo notwithstanding, "benefit of the public" is not "public use"; the former can be stretched infinitely, to the ending of the rule of law. You're also ignoring that they admit they're seizing the property for less than it's value: "Richmond, working with San Francisco-based Mortgage Resolution Partners, offers $150,000 to buy a $300,000 bank loan on a house that is now worth $200,000 and is in danger of foreclosure. If the bank agrees, the city and the company then obtain the loan at $150,000. Richmond and the company then offer the homeowner a new loan of $190,000, which, if accepted.... If the bank refuses to sell the loan to Richmond, then the city invokes its power of imminent domain and seizes the mortgage. It would then offer the bank a fair market value for the home." See the Naked Capitalism posting that cynicalkane brought to our attention for more details and a view from a very different angle: http://www.nakedcapitalism.com/2013/08/beware-of-private-equity-guys-bearing-gifts-eminent-domain-mortgage-scam-hit-with-well-deserved-lawsuit.html http://www.nakedcapitalism.com/2013/08/beware-of-private-equ... Also mentions that California has a property owner friendly way of establishing "just compensation".
- HarryHirsch 13y ago
  The offer of kUSD 150 in cash for a title to a house valued at kUSD 200 in Richmond, that the bank needs to realize a steady stream of income from, doesn't seem unfair outright. What I mean is, where are the creditworthy buyers in Richmond? The town is failing and not getting any better. What is always troubling is the interaction between municipal authorities and venture capital; their interests do not intersect, and there is little experience in municipalities with complex financial deals. The showcase piece is the Birmingham, AL sewer disaster. The idea of eminent domain is appealing, and the real-world implementation is another problem.
  - bradleyjg 13y ago
    They aren't seizing title to the house, they are seizing a lien and promissory note. Although the lien can't be worth more than the underlying property, the note certainly can.
    - HarryHirsch 13y ago
      You are right. I used "title" as a synonym for the note, as in the title the court awards you against someone who owes you a debt.
- bradleyjg 13y ago
  > What the 7th Amendment actually said is "nor shall private property be taken for public use, without just compensation." That's the fifth amendment.
  - hga 13y ago
    A mistake on my part before I edited it. It was the 7th as passed by the Congress, just not as ratified by the states: https://news.ycombinator.com/item?id=6274204 https://news.ycombinator.com/item?id=6274204 ....
- csense 13y ago
  > "benefit of the public"...can be stretched infinitely, to the ending of the rule of law The Supreme Court has ruled that the government can take property from one private party and give it to another private party for "economic development" [1]. So it's already been stretched pretty far. [1] http://en.wikipedia.org/wiki/Kelo_v._City_of_New_London http://en.wikipedia.org/wiki/Kelo_v._City_of_New_London
Daniel_Newby 13y ago
> The constitution explicitly permits eminent domain, provided it's for the benefit of the public. No. The Constitution provides that property taken for the public good must be fairly paid for. Property can be taken for private use without compensation. For example, the adverse possession laws in many jurisdiction.
smsm42 13y ago
The constitution also requires fair compensation, which is exactly what Richmond tries to avoid. If they offered fair price, there's no reason why for the bank doesn't make sense to sell distressed properties - banks do a lot of such deals. Banks hate dealing with bad real estate instead of good clean money flows. But it looks like the city wants to force the banks to sell for significantly lower price - they plan to argue that the loan is actually worth below market value, force the sale on that value and profit on it. This is not eminent domain, this is robbery.

hga 13y ago

What the 5th Amendment actually said is "nor shall private property be taken for public use, without just compensation." Kelo notwithstanding, "benefit of the public" is not "public use"; the former can be stretched infinitely, to the ending of the rule of law. You're also ignoring that they admit they're seizing the property for less than it's value: "Richmond, working with San Francisco-based Mortgage Resolution Partners, offers $150,000 to buy a $300,000 bank loan on a house that is now worth $200,000 and is in danger of foreclosure. If the bank agrees, the city and the company then obtain the loan at $150,000. Richmond and the company then offer the homeowner a new loan of $190,000, which, if accepted.... If the bank refuses to sell the loan to Richmond, then the city invokes its power of imminent domain and seizes the mortgage. It would then offer the bank a fair market value for the home." See the Naked Capitalism posting that cynicalkane brought to our attention for more details and a view from a very different angle: http://www.nakedcapitalism.com/2013/08/beware-of-private-equity-guys-bearing-gifts-eminent-domain-mortgage-scam-hit-with-well-deserved-lawsuit.html http://www.nakedcapitalism.com/2013/08/beware-of-private-equ... Also mentions that California has a property owner friendly way of establishing "just compensation".

HarryHirsch 13y ago
The offer of kUSD 150 in cash for a title to a house valued at kUSD 200 in Richmond, that the bank needs to realize a steady stream of income from, doesn't seem unfair outright. What I mean is, where are the creditworthy buyers in Richmond? The town is failing and not getting any better. What is always troubling is the interaction between municipal authorities and venture capital; their interests do not intersect, and there is little experience in municipalities with complex financial deals. The showcase piece is the Birmingham, AL sewer disaster. The idea of eminent domain is appealing, and the real-world implementation is another problem.
- bradleyjg 13y ago
  They aren't seizing title to the house, they are seizing a lien and promissory note. Although the lien can't be worth more than the underlying property, the note certainly can.
  - HarryHirsch 13y ago
    You are right. I used "title" as a synonym for the note, as in the title the court awards you against someone who owes you a debt.
bradleyjg 13y ago
> What the 7th Amendment actually said is "nor shall private property be taken for public use, without just compensation." That's the fifth amendment.
- hga 13y ago
  A mistake on my part before I edited it. It was the 7th as passed by the Congress, just not as ratified by the states: https://news.ycombinator.com/item?id=6274204 https://news.ycombinator.com/item?id=6274204 ....
csense 13y ago
> "benefit of the public"...can be stretched infinitely, to the ending of the rule of law The Supreme Court has ruled that the government can take property from one private party and give it to another private party for "economic development" [1]. So it's already been stretched pretty far. [1] http://en.wikipedia.org/wiki/Kelo_v._City_of_New_London http://en.wikipedia.org/wiki/Kelo_v._City_of_New_London

Daniel_Newby 13y ago

> The constitution explicitly permits eminent domain, provided it's for the benefit of the public. No. The Constitution provides that property taken for the public good must be fairly paid for. Property can be taken for private use without compensation. For example, the adverse possession laws in many jurisdiction.

smsm42 13y ago

The constitution also requires fair compensation, which is exactly what Richmond tries to avoid. If they offered fair price, there's no reason why for the bank doesn't make sense to sell distressed properties - banks do a lot of such deals. Banks hate dealing with bad real estate instead of good clean money flows. But it looks like the city wants to force the banks to sell for significantly lower price - they plan to argue that the loan is actually worth below market value, force the sale on that value and profit on it. This is not eminent domain, this is robbery.