Lt. Gov Tells SIFMA "Back off" Eminent Domain Threats
California Lieutenant Governor Gavin
Newsom blasted a Washington trade group on Friday for making what he called threats
against local officials in the state's San Bernardino County. As was reported in
MND, in June the county's Board of Supervisors outlined and approved a plan
to use its eminent domain authority to seize and restructure underwater
mortgages. Since that action officials
in Berkley and Chicago have passed similar measures.
Almost immediately after the San
Bernardino vote the Securities Industry and Financial Markets Association
(SIFMA) blasted the proposal saying in a press release that the action will "result
in significant harm to the residents the agreement intends to help." The plan, SIFMA said, may cause loans to
homeowners in the area to be "excluded from securitizations, and some portfolio
lenders could withdraw from these markets.
In other words, this program could actually serve to further depress
housing values in the country by restricting the flow of credit to home buyers."
On Friday Newsom said "The Washington,
DC special interest groups need to back off.
We owe it to homeowners everywhere to see if the solutions being
discussed in San Bernardino will work." He
called on SIFMA "to cease making threats to the local officials of San
Bernardino County." Newsom said that the
financial sector has had long enough to fix the problems they helped
create. "We must think big and help our
local governments develop solutions - because the industry and federal
government have not."
"This may be an aggressive idea, but communities such as San
Bernardino, Chicago and others have no choice in these desperate times,"
Newsom continued. "We cannot allow Wall Street, who exploited the housing
market for financial gain, to kill an idea before it is given a fair hearing." To untether homeowners from the anchor of
underwater mortgages would restore consumer confidence, give a boost to the
economy and to job creation, he said.
"The true injustice of the last few years is that as banks were bailed
out and government claimed it has done all it can, the homeowner, the backbone
of our communities, has received nothing but eviction notices," said
Newsom. "We need to help the people that government bailout programs have
left behind - ordinary folks that have worked hard to keep their homes even as
If San Bernardino, Berkley, or Chicago proceed with their plans it would
probably represent the first time eminent domain was used in the taking of
financial instruments. It is traditionally
used by government to seize properties needed for public projects and SIFMA
members have stated that litigation would certainly follow any such actions,
possibly tying up any resolution in the courts for years.
Reuters reported that Kenneth E. Bentsen, Jr., SIFMA's executive vice
president for public policy and advocacy released a response to Newsom that
said in part, "We're simply laying out the facts so that the county is
fully informed of the impacts of the proposed actions. We believe that this
inappropriate and unconstitutional use of eminent domain would result in unfair
takings from every-day investors and pensioners and be immensely destructive to
the U.S. mortgage markets."