As reported by Brenda Swanson at Housing Wire last week, Richmond’s screwball eminent domain plan for some 640 underwater mortgages may be fizzling out like the last match in a tornado. The brewing storm is the fact that eminent domain plans like Richmond’s, as chronicled by Halfway To Concord, generally never works out for communities. The only winners seem to be politically connected rent-seeking developers who grab the money and move on like a swarm of locusts to the next unsuspecting wheat field.
According to Swanson,
Eminent domain at its core is used to seize land to build public necessities like highways, electrical lines and public schools.
But when the very company pushing for the product is dropping the ball, it is hard to jump on board with the idea that eminent domain is a good idea.
In the most recent “necessary” attempt of eminent domain, Richmond, Calif. proposed to allow city officials to seize mortgages using the power of eminent domain. In turn, officials would adjust the existing loan terms for troubled borrowers. (See details of the plan.)
And one of the main faces behind the resurgence: Mortgage Resolutions Partners.
Eminent domain first gained public attention when the firm Mortgage Resolutions Partners tried to get San Bernardino County officials to adopt a similar plan in the California county.
However, so far, the company has failed at marketing the product or itself.
Back in September, a scheduled eminent domain debate between Realtor Jeff Wright and Stephen Gluckstern, chairman of Mortgage Resolution Partners, never happened since Gluckstern bailed on the discussion.
And now, the CEO of Mortgage Resolution Graham Williams has officially left the company.
While the company has not commented, interestingly enough, Steven Gluckstern is now reported as the chairman and acting CEO.
This doesn’t exactly give you a vote of confidence.
Another prime example of how ineffective eminent domain can be is Kelo v. City of New London, which after nine years is barren with no trance of urban revival despite the use of eminent domain.
While this may not be the fate of Richmond, in September, the city council officially approved the decision in a 4-to-3 vote to move forward with the initiative. Whether Richmond has a viable dance partner to pimp its plan is another thing.
As an article in the Washington Exmainer put it:
The economic philosophy at work here isn’t capitalism or socialism. It’s corporatism: the belief that government and business should work together. You could describe corporatism as the view that profits provided by the market aren’t sufficient motivation for business, so government must put some icing on top. From another perspective, corporatism is government’s attempt to harness the profit motive for the goals of policymakers: let industry row the ship while politicians steer.
Corporatism typically has a political advantage: The shiny new stores built on stolen land, or the jobs created through subsidies, are very visible, while the costs — opportunity costs, increased deficits or crushed Mom & Pop businesses — are hidden.