Saturday, July 26, 2008

"There will be virtually nothing stopping states and localities from using federal housing grants to help themselves to confiscate housing."

Congress' bailout opens doors to eminent domain seizures

Warning issued about 'bonanza' of potential property confiscations

July 26, 2008

By Bob Unruh
Copyright 2008

The congressional plan to bail out the U.S. housing and mortgage industries, which could be approved by Congress and signed by the president as early as this weekend, actually endangers Americans' housing, according to the director of the Center for Entrepreneurship at the Competitive Enterprise Institute.

"Of all the unintended consequences of the housing bill that passed the House – of which there will likely be many – one of the most ironic and far-reaching may be this: that whatever security marginal homeowners have from foreclosures, their homes will be far less safe from being taken by a bureaucrat through eminent domain," John Berlau wrote on the organization's website.

According to the Wall Street Journal the White House says the bill needs to be enacted soon so its new authorities will start taking effect.

The sweeping package, the report said, "is the government's most aggressive response to rising foreclosures and fragile credit markets. It creates a new regulator for ailing mortgage giants Fannie Mae and Freddie Mac and establishes a $300 billion program to expand the Federal Housing Administration's ability to guarantee mortgages."

However, some of the details included in the hundreds of pages of the bill are likely to surprise – and concern – Americans. For example, there's a requirement for a new fingerprint registry for those who are associated with the mortgage industry, raising privacy concerns for many.

There's also a provision many are interpreting as allowing the federal government to obtain information about online spending, money transfers and purchases, including ordinary eBay purchases.

Now comes the concern that the new proposal's affirmation of the Kelo decision by the U.S. Supreme Court actually could make the situation worse for homeowners.

That still-bitterly opposed Supreme Court opinion in Kelo v. New London decided in 2005 that the U.S. Constitution allows the taking of private property for private economic development, a decision decried by WND columnist Ellis Washington as "a blatant violation of citizen property rights, also an obvious misinterpretation of the Takings Clause of the Fifth Amendment, which mandates, 'nor shall private property be taken for public use, without just compensation.'"

Berlau explains his worries about the wake of the Kelo verdict, and the new provisions in the housing bailout plan.

"Some states have passed laws protecting property owners by barring eminent domain solely for economic development purposes. But for the many states that still allow this practice, the federal government is often the source of funds for the projects that result in the use of eminent domain. Efforts to bar federal funds to be used on projects that make use of this type of eminent domain have stalled in this and the last Congress," he said.

"To their credit, the drafters of the Housing and Economic Recovery Act of 2008, which passed the Senate on July 11, at least recognized this danger of throwing billions in construction grants to state and local governments. So they put in a clause stating, 'No funds under this title may be used in conjunction with property taken by eminent domain, unless eminent domain is employed for a public use.' The clause then adds that 'public use shall not be construed to include economic development that primarily benefits any private entity," he said.

"But this language has vanished from the House bill," he said.

Replacing it is language that "would give governments substantially more leeway to take land."

That provision changes the Senate's prohibition on funds "used in conjunction with property taken by eminent domain" with the looser ban of using funds for a "project that seeks to use the power of eminent domain."

"This new language in the House bill would give property-grabbing bureaucrats an easy way around the supposed prohibition on using eminent domain," Berlau said. "All they would have to do is take property for any reason that Kelo allows, and then come up with another project for the specific use of that property. If land were grabbed for general economic development, as Kelo permits, and then a new project were created for a city to sell this land to developers, this would likely not be a violation of the House bill. After all, the new project isn’t 'seeking' to use eminent domain, it is merely using land that had already been confiscated."

He warned of the potential for the bill to "stimulate a bonanza of state and local property confiscation of the type green-lighted in the Supreme Court's 5-4 decision Kelo v. New London."

"This new language means … there will be virtually nothing stopping states and localities from using the federal housing grants to help themselves to confiscate housing," he said.

Senators can be reached through the Capitol HIll switchboard at 202-224-3121.

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