An old saying my mother would sometimes use when I was, let’s say less than perfect, was, “the road to hell is paved with good intentions”. In today’s world, that destination is Richmond, California.
Pathological Altruism is altruism that attempts to promote the welfare of others, but instead results in unanticipated harm…A crucial qualification is that while the altruistic actor fails to anticipate the harm, an external observer would conclude that it was reasonably foreseeable.”
—–Barbara Oakley, “Concepts and implications of altruism bias and pathological altruism,” Proceedings of the National Academy of Sciences.
We have Barbara Oakley to thank for providing a definition to describe Richmond; I would have thought more in terms of ignorance and the law of unintended consequences. But the many negative consequences awaiting the city, and others, surrounding its plan to use eminent domain to “save” underwater homeowners are well known to the City; most are spelled out several times in the Wells Fargo lawsuit against the city and its partner Mortgage Resolution Partners. “Saving” between six hundred and one thousand underwater mortgage holders will hurt:
• Every homeowner in Richmond: property values will fall and the entire residential real estate market will decline in the city. According to City Data, there are 36,151 houses in Richmond (47% rentals). So the city will help less than 1% of them and punish 99+%.
• All potential Richmond homeowners; new homeowners will a.) Find it difficult to obtain loans in the city and b.) Be required to pay higher interest on loans they do obtain to cover the higher risk lenders face.
• Renters; as residential loans become more expensive, landlords will pass these increases on to renters.
• The City of Richmond; the city will lose property and sales tax revenue as property values decline and fewer dollars are spent in city businesses as its overall economy worsens.
• The mortgage backed securities market in California and, possibly the country; as risks rise, especially if other cities follow Richmond in this scheme, the market will decline or become more expensive.
• State and local pension plans, 401(k) plans, college savings plans, insurance companies, mutual funds, university endowment funds, and individual retirees who own the securities involved in the mortgages in Richmond; as the city and Mortgage Resolution Partners execute their scheme, the owners of the securitized bonds will lose hundreds of millions of dollars.
• Taxpayers; will have to cover losses suffered by Freddie Mac and Fannie Mae, two of the largest investors in the Trusts involved in the city’s scheme.
• The “saved” homeowners; will each owe tens of thousands of dollars in taxes as the IRS counts their mortgage reduction as income!
In a recent interview with Bloomberg News, Richmond’s mayor, Gayle McLaughlin, indicated that “the economic recovery that has slowly crept across the U.S. has mostly bypassed Richmond”. Cities like Richmond have a right and an obligation to utilize such a program for the public benefit.”
She is surprised that demonizing, suing, and penalizing capitalism, businesses, and success in general, leads to the economic recovery bypassing the city? Or as City Councilman Nathanial Bates said in the same Bloomberg article “The way you treat your largest taxpayer is an indication of how you treat the smallest taxpayer. It sends a negative message to the business community and potential investors who are interested in coming to your city of how they would be treated just because they are big business.”
I’m sure the mayor and city council care for the people of Richmond; or, at least care enough to get re-elected. And I’m sure that at least people with the targeted underwater mortgages love the mayor and council. It is just that desperate, anti-capitalistic, progressive, destructive, pathological altruistic result that gets in the way.
The city has a long and proud history as a “Progressive” city, i.e., dependent and dysfunctional; a city where entrepreneurship is defined by how often you can sue Chevron or run programs where the city government hands out money for some mythical collective purpose.
In 2011 the Mayor participated in an Occupy Wall Street protest. In an open letter to the Occupy movement she complained that the city had a growing number of poor residents while Chevron was making billions of dollars. Without recognizing the irony of her statement, the mayor was negatively critiquing her own path, a path she is taking the city and its residents down: implementing social justice and social advocacy programs that have and will continue making the city’s residents poorer while the city continues punishing profitable companies, retirees, pension and endowment funds and their workers/taxpayers to complete the downward spiral.
Pathological altruism at its finest.