By Shaila Dewan | The New York Times
You can’t fight city hall, the saying goes. But Gayle McLaughlin, the mayor of Richmond, Calif., a city of 100,000 souls, would tell you that fighting Wall Street is harder. Even for city hall.
Ms. McLaughlin has a plan to help the many Richmond residents who owe more money on their houses than their houses are worth, but it’s one that banks like Wells Fargo, large asset managers like Pimco and BlackRock, real estate interests and even Fannie Mae and Freddie Mac, the mortgage finance giants, have tried to quash. Her idea involves a novel use of the power of eminent domain to bail out homeowners by buying up and then forgiving mortgage debt.
But the financial institutions have warned that mortgage lending would halt in any city that tried eminent domain — and they have lobbied Congress to ensure that the threat is not an empty one. Opponents have filed federal lawsuits, while real estate interests have made robocalls to residents and sent mass mailers warning that the plan would allow “slick, politically connected” investors to “take houses on the cheap.” (The idea is actually to buy mortgages, not houses.)
