San Bernardino bankruptcy turning to eminent domain

Anytime you hear the words eminent domain, you either run for the hills or hold on for dear life. Eminent domain gives the right-of-way to any endeavor deemed for public use by allowing that public use to supersede previous land and home ownership. It walks a fine line of what government can and can’t do.

Now bankrupt San Bernardino is flirting with the idea of applying eminent domain to shore up—and cherry pick—mortgages that are “underwater”. It’s a horrendous idea with good intentions, and you know where a road paved with good intentions could lead. The Wall Street Journal opines, “The housing bust has produced some terrible ideas, but now comes what may be the worst: A California county and two cities hit hard by foreclosures are thinking of using eminent domain to seize mortgages from private investors.”

Those proposing this convoluted idea are Mortgage Resource Partners (MRP), a San Francisco venture capitalist firm with strong ties to California politicians. Note, former California treasurer and now financial reform bigwig, Phil Angelides, was working at MRP before leaving to keep the focus away from MRP’s political exploits.

With nearly half of all homes in foreclosure and an unemployment rate tipping the scale at 12%, San Bernardino County is in a world of trouble. Having to declare Chapter 9 bankruptcy just recently, it wasn’t long ago that San Bernardino was the darling of a real estate bonanza. The New York Times writes, “A decade ago, Fontana and other cities here in the Inland Empire — the vast suburban sprawl east of Los Angeles — were just beginning to boom, with new subdivisions opening seemingly every weekend. Now, San Bernardino County, the largest county in the country, has cities with some of the nation’s highest foreclosure rates.”

Real estate investors with no idea of California’s topography or economy had to do no more than venture out east which meant most investors would buy up in San Bernardino County. It’s the biggest county in the U.S. 

Now that the tables have turned, the county is desperate to salvage its local economy. This type of eminent domain is flirting with disaster. And at any rate, it should be put to a vote before this kind of government intervention is allowed to disrupt people’s ability live out the course of their personal business.