The Securities Industry and Financial Markets Association (SIFMA) sent a letter to top Obama officials asking them to oppose San Bernardino County’s use of eminent domain to seize mortgage-backed securities (MBS).
SIFMA wrote to Federal Reserve Chairman Ben Bernanke, Department of Housing and Urban Development Secretary Shaun Donovan, and Treasury Secretary Tim Geithner, on Saturday, July 21. The letter warned against damage to renters and taxpayers:
This plan is being promoted to San Bernardino County and other entities by a private sector, profit-motivated entity called Mortgage Resolution Partners. Legal experts, including SIFMA’s counsel, former Solicitor General Walter Dellinger, believe this use of eminent domain to be unconstitutional. …
The proposal to use eminent domain … would lock in a tremendous profit for the backers of the scheme, as the loans would be seized from MBS trusts at a level below their actual value to holders and sold at a premium in government guaranteed MBS. Given the legal uncertainty of this plan, significant risk would be shifted to the federal government and thus the taxpayers. HUD, in particular, must not sanction such unethical and questionable use of its programs. …
This action would destroy MBS investor confidence, possibly irreparably. The impact this would have on the fragile housing and housing finance markets would be catastrophic. This circumstance is all the more distressing when we consider that the ultimate investors in these MBS are the pension funds, mutual funds, 401 (k) plans, and other investment vehicles that millions of Americans use for retirement, education, and other savings. In essence, a wealth transfer would occur from the savings of working families to a secretive group of private investors cloaked by a limited liability company. Any progress made in promoting the return of private capital to mortgage markets would be reversed.
The Free Beacon reported last week that Obama donors, including Mortgage Resolution Partners’ chairman, have advocated for the proposal.
MRP’s chairman Steven Gluckstern bundled between $200,000 and $500,000 for Obama’s in 2008 campaign. He has personally donated $160,000 to Democratic candidates and committees since 2000, including $7,300 to Obama.
Dana Berliner, litigation director for the Institute for Justice and co-lead counsel in the 2005 Supreme Court eminent domain case Kelo v. City of New London, Conn., called the proposal a “blatant attempt by one group of investors to steal money from another group of investors.”