San Bernardino’s Eminent Domain Blueprint to Save Housing Will Someday Undermine IP

by Mike Wendy on July 16, 2012

On Friday, unelected officials in San Bernardino County considered a radical plan that, in order to “help” the local housing market and the ailing economy, will seek to use eminent domain powers to condemn – that is, take – the mortgages of underwater homeowners, and turn those over to a private firm to refinance them, freeing up, we’re told, much needed cash for those homeowners and the local economy. (Disclaimer: I consult for private property interests that do not favor this plan)

As you may know, eminent domain “is an action of the state to seize a citizen’s private property, expropriate property, or seize a citizen’s rights in property with due monetary compensation, but without the owner’s consent.” (source: Wikipedia)

As it is typically employed, eminent domain has been used by government entities to acquire real property for public works – like road widening, parks, convention centers, etc.  San Bernardino’s plan to condemn mortgages – something closely watched by the Left as a test case (noted here in this NPR story) – is, well, novel.  Very.  It’s a powerful legal cudgel that can force mortgage investors to sell those loans to other private investors – not the government itself – all for the “greater public good.”

San Bernardino’s plan is the pathological result of a Supreme Court case called Kelo v. City of New London decided in 2005.  Generally, Kelo stands for the proposition that local officials can hand-over the private property of individuals to other private entities – not just to government entities – as long as the planned new use serves a “public use.”

According to this story, San Bernardino’s “public use” reasoning looks like this:

“When you owe more on your house than the house is worth, your behavior changes,” [says Steven Gluckstern, chairman of Mortgage Resolution Partners, the private party that will receive and profit from the condemned mortgages]. “You don’t spend money going to a local restaurant, you don’t hire the local handyman. So our thesis is, unless you fix this problem, you can’t really ever have the recovery we’re all hoping for.”

Wow.

In seeking to “fix” underwater housing risk and thereby “help” people spend more in the local economy (the purported “public use” goal), the plan undermines the very foundation of private property itself – one which for centuries has assumed that the individual property holder, chastened by risk in his investment, is in the best position to make good on that investment because he has the most to gain or lose from it.  On the whole, this resource allocation system benefits society far better – and is far more compatible with individual liberty – than anything a centrally planned economy guided by bureaucrats can do.

Here’s the real evil in the plan, however: Who’s going to want to risk anything for / with private property when the government can easily steal it and give it to someone else to “better” develop it, all based on the most rigged / thinnest of reasoning?

Few.

I wouldn’t normally be writing about this in this blog, but it has huge importance to our intellectual PROPERTY-underwritten economy. Virtually all the gadgets we produce, and a lion’s share of our services, too, depends on intellectual PROPERTY to thrive.

The reason why San Bernardino is so closely watched by the Left’s takers is because the same reasoning that can be used to condemn an agreement can also be used where other private property “gets in the way” of serving the “greater public good.”

As it applies to America’s world leading intellectual PROPERTY-driven industries, San Bernardino’s blueprint will someday extend there, too  – that is, working to extract the guts in our communications technologies, drugs, medical innovations, energy solutions, content, etc. for “better” others to mine and profit from as bureaucrats, not the marketplace, determine.

Great recruiting tool to motivate the brainiacs out there, eh?

Think again.

To some extent, we have already seen a version of the San Bernardino plan before – as in the FCC’s Net Neutrality regulations, which have stripped private property rights from network providers, and have given them to edge companies like Google, all to prosecute the “public use” goal of “preserving the open the Internet.”

Numerous other U.S. agencies traffic in this same abuse of governmental authority – wielding force and legal coercion to arrive at “fair” results to “better” serve the public.

Anyway, the short of it is this: If the private property is valuable, and it’s “integral” (as determined by conflicted and oftentimes corrupt public officials) to the “public interest,” San Bernardino’s plan will not be isolated to just underwater mortgages.  Any type of property now sits on the table for the taking, including IP.

At a time when we need more people taking risk and working to come up with viable solutions to our most pressing problems – many solutions of which will depend upon intellectual PROPERTY to work – San Bernardino will bigfoot those efforts bigtime.

***

We live in a time when Robin Hood expropriation by do-gooding government officials has become the norm.   Politicians campaign on it.  Regulators salivate over it.  The media cheers it on to force “fairness” and equality of result for the 99%.

But the 99% should be very concerned.

The fruits of your labor – your property – really isn’t yours when it can be arbitrarily and capriciously ripped from your paws by the state and redistributed to its greedy cronies for the “public good.” Moreover, a government that can willy-nilly press you into indentured servitude for others (that’s essentially what the redistribution does) can also easily determine if your most valuable possession – your life – is worth saving when the cost of saving your life challenges Uncle Sam’s balance sheet (as in ObamaCare).

The San Bernardino plan represents a new and malicious tool against individual liberty and societal prosperity that came from it.  In many respects, it also reflects the choice we must make come this November: Whether we want a society built on individual risk, hard work, and private property-driven free markets; or one built on poaching, cronyism, and centrally-planned dystopias, treating risk-takers as enslaved underwriters for the “greater good.”

The former is a hard but proven path toward sustainable and fair prosperity.

The latter is the abyss.

 

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