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Category Archives: Economy

The Price of Crisis: Eminent Domain, Local Governments, and the Value of Underwater Mortgages

Brescia, Raymond H. and Martin, Nicholas M., The Price of Crisis: Eminent Domain, Local Governments, and the Value of Underwater Mortgages (September 19, 2014). Temple Political & Civil Rights Law Review, Vol. 24, 2014, Forthcoming. Available for download at SSRN:

“Governments at all levels in the U.S. have deployed a range of tactics to address some of the most pernicious effects of the Financial Crisis of 2008: namely, a loss of trillions in homeowner equity as well as the growth of the prevalence of underwater mortgages, where the outstanding principals on the mortgages exceed the value of the underlying properties. Among other tactics for addressing such impacts, local governments have begun to explore whether it is wise and legal to use the power of eminent domain to seize distressed home mortgages. This Article attempts to situate this approach to such mortgages within the larger economic, legal and policy context to determine whether this approach has a sound basis in law and policy. To do this, we deploy the tools of Comparative Institutional Analysis to assess the potential viability of using eminent domain to seize underwater mortgages. In doing so, we review the wide-ranging efforts of governments at all levels in the United States to deal with the economic effects of the Financial Crisis of 2008. We look at the relative success of these different tactics used by these governmental entities — from ex ante regulatory approaches to ex post law enforcement and civil litigation strategies — to assess the most effective tools available to remedy the economic and social problems posed by distressed mortgages. We then determine whether the use of eminent domain by localities is consistent with those governmental responses to the fallout of the Financial Crisis that have proven effective in responding to some of its worst impacts: here, the loss of homeowners’ equity in their homes and the prevalence of underwater mortgages. In carrying out this analysis we ask, and attempt to answer, five key questions. First, are local governments appropriate actors to address the lingering problem of underwater mortgages? Second, what has been the relative success of the range of tactics that governments at all levels have used to address underwater mortgages, including law enforcement strategies and legislative and regulatory measures? Third, assuming local governments are appropriate actors to address this problem, how should localities and, if necessary, courts, value underwater mortgages in the context of condemnation proceedings: i.e., what is the appropriate amount of compensation that localities should pay mortgagees and other lienholders when seizing underwater mortgages? Fourth, what are some strategies local governments can use to find the resources necessary to finance a program that would seize underwater mortgages and, in effect, purchase them from mortgage holders? Finally, what are some potential down-side risks to local governments taking these actions? This review concludes not only that local governments are appropriate actors to address underwater mortgages, but also that ex post legal tools — such as eminent domain — are appropriate and effective techniques to use to address the fallout from the Financial Crisis of 2008, particularly its impact on homeowners. It also finds that the just compensation due holders of distressed, underwater mortgages, should governments seek to seize them by eminent domain, should be roughly sixty percent of the unpaid principal balance on those mortgages.”

Left Behind: The Long-term Unemployed Struggle in an Improving Economy

“A new John J. Heldrich Center for Workforce Development at Rutgers University analysis of unemployed and long-term unemployed Americans reveals the profound struggles of Americans who remained jobless for months and years even as the economy gradually recovers. The survey reveals that more than 7 in 10 the long-term unemployed say they have less in savingsContinue Reading

Hedge Funds versus Mutual Funds (2): An Examination of Multialternative Mutual Funds

McCarthy, David, Hedge Funds versus Mutual Funds (2): An Examination of Multialternative Mutual Funds (September 19, 2014). Available at SSRN: “This paper examines those mutual funds classified by Morningstar as “Alternative.” It follows an earlier paper, “Hedge Funds vs. Mutual Funds: An Examination of Equity Long/Short Funds,” which found that equity long/short mutual funds didContinue Reading

Liquidity Supply Across Multiple Trading Venues

Lescourret, Laurence and Moinas, Sophie, Liquidity Supply Across Multiple Trading Venues (September 15, 2014). Available for download at SSRN: “Market fragmentation and technology have given rise to new trading strategies. One of them is to supply liquidity simultaneously across multiple trading venues, which requires multi-venue management of inventory risk. We build an inventory model inContinue Reading

Russia looks beyond West Siberia for future oil and natural gas growth

EIA: “Russia was the world’s largest producer of crude oil (including lease condensate) and the world’s second-largest producer of dry natural gas in 2013. Most of Russia’s crude oil and natural gas production occurs in West Siberia, a part of central Russia that stretches from the northern border of Kazakhstan to the Arctic Ocean. However,Continue Reading

Financial Crisis, Unconventional Monetary Policy and International Spillovers

Chen, Qianying and Filardo, Andrew J. and He, Dong and Zhu, Feng, Financial Crisis, Unconventional Monetary Policy and International Spillovers (September 18, 2014). HKIMR Working Paper No.23/2014. Available for download at SSRN: “This paper studies the effects of unconventional monetary policies in the major advanced economies. We first examine the cross-border financial market impact ofContinue Reading

Domestic Abuse / Violence – Get Help Inbox x

“Domestic abuse and violence have been front-page news lately, and a topic of discussion throughout the country. The US Department of Justice defines domestic violence as, “a pattern of abusive behavior in any relationship that is used by one partner to gain or maintain power and control over another intimate partner.” It can be: Physical Sexual Emotional Economic PsychologicalContinue Reading

Employee Benefits in the United States – March 2014

“Employer-provided medical care was available to 86 percent of full-time private industry workers in the United States in March 2014, the U.S. Bureau of Labor Statistics reported today. By contrast, only 23 percent of part-time workers had medical care benefits available. Access, or availability, also varied by establishment size: 57 percent for workers in small establishments (those withContinue Reading

Social Security Reform: Legal Analysis of Social Security Benefit Entitlement Issues

CRS – Social Security Reform: Legal Analysis of Social Security Benefit Entitlement Issues. Emily M. Lanz, Legislative Attorney; Thomas J. Nicola, Legislative Attorney. September 17, 2014 “Calculations indicating that the Social Security program will not be financially sustainable in the long run under the present statutory scheme have fueled the current debate regarding Social Security reform. This report addresses selectedContinue Reading

IG Report – Millions Wasted on Communication Towers in Afghanistan

Jessica Murphy - POGO: “According to a new report by the Special Inspector General for Afghanistan Reconstruction (SIGAR), the State Department paid $6.5 million for six communication towers that were never used as intended. This high cost exceeded the State Department’s initial recommended limit of $2 million per contract. In 2010, the State Department began constructing a network of communicationContinue Reading

Social Security: What Would Happen If the Trust Funds Ran Out?

CRS – Social Security: What Would Happen If the Trust Funds Ran Out? Noah P. Meyerson,  Analyst in Income Security. August 28, 2014. “The Social Security Trustees project that, under their intermediate assumptions and under current law, the Disability Insurance (DI) trust fund will become exhausted in 2016 and the Old-Age and Survivors Insurance (OASI) trust fund will becomeContinue Reading

Poverty: 2012 and 2013

“The poverty rate is a key economic indicator often used by policy makers to evaluate current economic conditions within communities and to make comparisons between sectors of the population. It measures the percentage of people whose income fell below the poverty threshold. Federal and state governments use poverty estimates to allocate funds to local communities.Continue Reading