Last night, Richmond, California’s city council approved the plan to use eminent domain to help underwater borrowers by a vote of 4-3. The plan is pure fraud. Mortgage Resolution Partners (MRP), an advisory firm, rounded up investors to supply capital to Richmond so that it could purchase the mortgages of underwater borrowers in the area. The city would then right down the value of the loan so that the borrowers could refinance at a lower rate. However, MRP wasn’t just helping out the city. It was looking to make a profit. And how was it doing that? By paying investors well below fair market value for the loans.
I’ve said repeatedly that I have no idea how Richmond fell for this plan. These two tweets from Wonkblog’s Lydia DePillis, who was at the meeting, may explain it a bit:
A dysfunctional city council that doesn’t understand what they’re voting on is about the best explanation I’ve heard for why the city is implementing MRP’s plan. Still, I was hoping someone would talk some sense into the council members and explain to them why this is such a bad idea. Unfortunately, that hasn’t happened.
Not much has happened in the past couple of weeks with Richmond, California’s use of eminent domain to help underwater borrowers. As I’ve said a couple of times, this is just a big scam by the firm supplying the capital, Mortgage Resolution Partners (MRP), and Richmond fell for it. It’s come out recently that the borrowers of the mortgages MRP is looking to seize are current on their payments. Banks and investors, not surprisingly, have no interest in giving these up and have filed a lawsuit to stop the plan. MRP pushed back with a ridiculous argument:
[MRP Chief Strategy Officer John] Vlahoplus, of Mortgage Resolution Partners, disputed the analysis, saying he’s confident that all of the 624 borrowers are indeed underwater. The city’s appraisals of the properties, he said, were handled by a firm whose work has been highly rated by securities trade groups.
About two-thirds of the borrowers have indeed stayed current on their loans, he said. But helping them now — before they default — is the best way to make sure they stay current on the loans and thereby limit further damage to Richmond’s battered neighborhoods.
“The intent here is to help the neighbors,” he said.
This is absurd. All of these mortgages were created before 2008, meaning that two-thirds of these borrowers have weathered the Great Recession and are still making on-time payments. These are performing loans. Investors love them. And now MRP is coming in and seizing them at well-below fair value to prevent them from defaulting in the future. After the economic disaster of the past six years, what are the odds that now these homeowners are going to default with the economy improving? Very low. And MRP is doing all of this is to help the neighbors!
Give me a break. The brashness of this argument is truly astounding. I have no idea how Richmond fell for it and I can’t imagine that any judge will as well. And it still overshadows the fact that eminent domain really could be a powerful tool to help underwater borrowers. What a shame.
Looking to get a tattoo or body piercing in the near future? Live in the District of Columbia? Well soon you may have to wait a full 24 hours after you request it before you can get inked. That’s just one of many new rules that D.C. officials have proposed for tattoo parlors and piercing shops. Sound absurd? That’s because it is.
What exactly is a regulation like this trying to accomplish? Stop drunken twenty-somethings that get a tramp stamp after losing a bet or preventing minors from getting a tongue ring without their parents’ knowledge? Sure, the Department of Health is looking out for these people, but the entire measure is paternalistic. If someone wants to get a tattoo, they shouldn’t have to wait a full day to do so.
Licensing requirements are a government-created barrier for new tattoo parlors.
At the same time, many of the proposed rules are important for safety reasons. They require tattoo parlors to inform their customers about the risks involved or if they have certain conditions that could adversely impact receiving a tattoo. Those are necessary. But a 24-hour waiting period? That’s nonsense.
This brings me to one of my biggest qualms here: licensing requirements. Licensing requirements for D.C. tattoo parlors isn’t new, but was implemented last year and is a large barrier to entry for new shops. The question is, do tattoo parlors really need to be licensed? The answer here is probably yes. Getting inked has potential dangers and ensuring that tattoo parlors follow proper safety procedures and are registered and monitored by the city’s Department of Health is smart public policy.
But it’s not clear-cut.
Consider the alternative. In a world without tattoo licensing requirements, would unsafe or bad tattoo parlors exist? Would we have an epidemic of crappy tattoos or people infected by unsterilized needles? Probably not. Those tattoo parlors would go out of business as people stayed away from them. Yelp would be particularly helpful in weeding them out. That’s how the free market works. Licensing requirements eliminate those unsafe shops, but they do so through government regulation. The reason that those requirements are good here is because an unsanitary tattoo parlor could stay in business for a while and infect a number of people. That’s enough of a public health concern to make the rule necessary.
But the rule does more than just ensure that tattoo parlors are safe. It also is a barrier to new entrants into the industry. After all, going through the process of receiving a license takes time and resources. The city also requires tattoo artists to take classes before earning their license. That costs money and takes time as well. It gives current tattoo parlors a built-in advantage over new entrants. No wonder that D.C. council member Yevette Alexander said that tattoo parlors came to her to ask for the licensing requirement.
Maybe we should require council members to wait 24 hours before suggesting new regulations that the industry itself proposed. That’s just as arbitrary.