San Francisco

I Left My Equity In San Francisco

When a government takeover plan is so whacked that even a city official in San Francisco thinks that it’s whacked, you know that it’s officially jumped the shark.

San Francisco’s controller discouraged city lawmakers from going forward with a proposal to use eminent-domain to help homeowners avoid foreclosure, citing federal limitations and risks to the city’s borrowing costs.

“The city’s participation in an eminent-domain program will likely have broader negative impacts on the city’s participation in financial markets, at least for an initial period,” controller Ben Rosenfield wrote in a report released Thursday.

Rosenfeld had been asked by the city’s Board of Supervisors to look into a proposal that the City by the Bay join the quixotic quest of the City by the Backside (Richmond) to seize underwater mortgages through the power of an eminent domain, write the principal balances down to current fair market value, and, its proponent’s hope, benefit homeowners who then can then lower their monthly mortgage payments as ride rising home values upward as the economy continues to recover. The only people who get screwed under that arrangement are lenders, but to hell with those capitalist pigs, goes the reasoning.

Ben noted in his report that mortgage giants Fannie Mae and Freddie Mac have made it clear that cities that use eminent domain for such purposes would threaten the safety and soundness of those two formerly insolvent entities (and Uncle Freddie and Aunt Fannie certainly know unsafe and unsound actions when they engage in them, don’t they?). Therefore, “[p]recluding any participation from Fannie Mae and Freddie Mac, the use of eminent domain would seem to be an inviable option.” An “inviable option,” indeed. Rosenfeld also observed that the eminent domain scheme “hasn’t yet been proven in any jurisdiction in the U.S.”

It’s doing great on Planet Bizarro, however.

A proponent of the plan was “disappointed” (i.e., threw a hissy fit).

“I’m disappointed that they seem to have bought into Wall Street’s scare tactics about eminent domain,” Avalos said in a statement. He said he plans to call a hearing soon to review the report.

I wonder if, at that hearing, he’ll threaten to “socialize” mortgages? That would be the cherry on the top of this fruitcake.

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