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Old October 6, 2008, 11:12 PM   #1
IZinterrogator
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The bailout bill and the Fourth Amendment

Does anyone else here feel uncomfortable about the idea of the government owning thousands of homes? Everytime I think about it, the sign I drive by every morning on my way into work comes to mind, which states that my right to refuse consent to search of my property ends at the fenceline of the Army fort I work at. Am I the only one who worries about the government arguing their right as the actual "homeowner" trumps our rights to be free of interference in our places of residence? Is there any current case law that protects us from having the BATF conducting a search for illegal weapons or the DEA from looking for illegal drugs with no probable cause since the "homeowner" authorized the search?
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Old October 6, 2008, 11:44 PM   #2
Mike Irwin
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No more uncomfortable than I do about the government signing on to millions of homes with VA or FHA backed mortgages.

The government won't "own" the homes. The deeds will remain with the purchasers, unless the government is forced for foreclose, and then the former owner is out of there anyway.

The simple fact that the government has purchased the loan paper doesn't suddenly nullify the deed that is issued to the homeowner and turn them into some sort of serf on government land, no longer subject to the protections of the Constitution.

Your work situation is significantly different. You're working ON a government reservation. Your home is not suddenly a government military reservation.
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Old October 6, 2008, 11:56 PM   #3
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Trust me Mike, I am 100% with you on that, and I will be expressing my displeasure with my representative's flip-flop on the bill this November (unfortunately, neither of my senators are up for re-election this year and I'm going to have to vote for one of them for President). But since it now signed into law, what now? The homes aren't a military reservation, but they are now federal property until the revised loans are paid off and the homeowners are in the clear.
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Old October 7, 2008, 12:25 AM   #4
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Ownership?

I don't think the government will have ownership of the homes. At least not in any more sense than the bank owns your home. They (govt or private bank) owns the lein on the property, but the homeowner "owns" the property. The homeowner is responsible for the taxes, not the bank that loaned them the money for the house. The bank does have a legal interest in the home, but they do not "own" it in the general sense.

Default on your mortgage and the bank will take the ownership away from you (forclose). If they had actual ownership all along, they could not take it from you if you didn't pay.

What the bailout is supposed to do is allow the govt to buy the "bad" debt from the failing banks. Supposedly (as we are told), the only thing that will change is the name on the paperwork of who holds the debt, nothing more. But there is always the fact that the govt has told us one thing and done another in the past to temper our faith in their intentions.

The authority for the govt to bail out Wall Street (or anybody else) comes from the general ability of Congress to pass any bill they so desire, and with the President's signature it becomes law. They can do anything they want, as long as it is "Constitutional". And we have a mechanism for examining laws and determining if they are constitutional. The fly in the ointment is the time it takes for challenges to reach the Supreme Court, the fact that the Court can refuse to hear a case, and ultimately, the concience and integrity of the 9 justices.

As the recent Heller case shows, things that are clear cut common sense to us can be narrow decisions (and go either way) to the High Court. And history shows that the personalities of the men and women making up the court are at least as important to their judgements as the written law itself.

So, Congress can do as it pleases, until the court says they cannot, or until the next election cycle, where the people have the chance to change Congress, if enough of them desire it so.
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Old October 7, 2008, 12:47 AM   #5
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"The homes aren't a military reservation, but they are now federal property until the revised loans are paid off and the homeowners are in the clear."

NO, they are NOT Government property!

I'm not sure where people are coming up with those fanciful (and blindingly WRONG) concepts about this process.

The government will hold an equity INTEREST in the property, it will have NO titular interest in the property.

It is absolutely NO different than were you to walk down the street to BIG BANK CO and take out a mortgage loan with them to buy your own home.

The fact that you receive a loan from BBC to purchase the house does NOT make them the owner of the property.

YOUR name will be on the deed of trust as owner, NOT BBC's.

BBC will hold an equity interest in the loan (in essence, a lien) they have made to you that is secured by the tangible property -- the home for which the deed of trust names YOU as OWNER.

It is exactly analogous to your car title. Until you pay off the note on that shiny silver Blumpkin 500, the lending institution has a lien on the property that protects its extension of credit to you.

Now, say you're paying your mortgage on time, but BBC gets caught up in the equity derivative mess and has to sell off its mortgage portfolio to the government under the terms of the bail out.

Does that mean that in a few days you're going to get a knock on the door and a "man from the government" will be handing you a revised deed of trust with your name scratched out and "The Government" written in?

Once again, NO.

The government is purchasing the EQUITY INTEREST in the loan, it is NOT purchasing the home out from under you.

Understand that. It is a very important distinction.

Until such time that you default on the mortgage and the holder of the equity interest (formerly BBC, now the government) takes steps to repossess the home under applicable state and federal laws.

This sort of buying and selling of mortgage loans goes on all the time. Most banks will have sold your mortgage loan to a servicing broker (like Norwest) before you make your first payment.

A couple of years down the road, Norwest may very well sell it to someone else.

Does that mean that every time someone sells the equity interest in your mortgage loan you are stripped of ownership?

NO.
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Old October 7, 2008, 06:46 AM   #6
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The only reason I feel uncomfortable with the government owning homes is that, historically, the government either ends up giving land away well below its value or they violate contractual obligations when they discover they can make more money. Indian treaties come to mind here.

The devil is in the details too. Some mortage contracts almost always permit the lien holder to make periodic inspections or appraisals of the property, with proper notification. If the government acts as the lien holder a careful review of the terms of contract are in order. If one uses Big Bank Corp to buy the property from the gov't, then BBC's mortage contract controls the terms.

Remember, if a private mortage company finances the property, they have loaned you the money to buy it from the owner (in this case the gov't). The property is yours, but with a lien on it in the form of a property mortage.
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Old October 7, 2008, 06:59 AM   #7
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Right. I don't see the bailout and subsequent loan ownership having anything to do with 4th amendment issues here, but there are a lot of other potential problems as noted.

Whether or not the government holds the note on various homes does not change, in any way, the position of the 4th amendment and those buying the homes.

With that said, it may make matters much easier if the government has to foreclose on the home...from the perspective of the government.
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Old October 7, 2008, 05:10 PM   #8
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I'm still waiting for someone to tell me, under what legal theory does the Congress have the authority to "bail out" any private business.

The only answer I get is the same one I got when I questioned about the Chrysler Corp. bail-out: The General Welfare Clause.

That's as much hokem as how the Congress and Courts have stretched the Commerce Clause.
EXACTLY what I want to know. And further, what happened in the House was appalling. An overwhelming majority on the populace was screaming NO and our representatives passed it anyway due to political pressure from Congressional leadership.

The President represents the United states proper, so his position is a somewhat credible position under the 'protection of the country' argument although it is STILL wicked outlandish, the Senate is supposed to be representing the States, with many of the States on the stick with needs for lines of credit to do business it's conceivable that the Governors expressed a will for passage but I haven't heard ANY hint of such advocacy at all. But the House, the House had clear and unambiguous directive from those THEY are by DEFINITION and DUTY obligated to directly represent and ignored us. The House is our ONLY actual representation to the Fed and they IGNORED US!

They know better? This was beyond our ability to grasp? NO. It was NOT.
Regardless of party those that voted in the House contrary to the will of those they represent need to be sent BACK HOME to stay.

I will vote and campaign for the very first, and every subsequent candidate of any party outside of the Nazi or Communist Party that will work to challenge the Constitutionality of this now passed and signed legislation.

Isn't it specifically forbidden for the United States government to finance any specific industry?

What I'm about to say isn't hyperbole, this undermines what America MEANS. A government for the people by the people just demonstrated that it's only true if the government agrees with the people. This turns the land of opportunity on it's head. It foreshadows a precedent of 'we paid, so we decide' where opportunity is concerned. You were TOO prosperous so give us more then you keep so you don't jeopardize de-stabilizing the market. You'll need to get MORE permissions and in the name of not letting this happen again your risk exposure will have to be with the boundaries.

This whole thing stinks and is genuinely anti-American.

I could go on and on about this one but I'll spare the readers and go back to shouting at the young and and my Representatives office....that is when I don't get a busy signal due to someone else taking their turn to do the same...
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Old October 7, 2008, 05:31 PM   #9
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with many of the States on the stick with needs for lines of credit to do business it's conceivable that the Governors expressed a will for passage but I haven't heard ANY hint of such advocacy at all.
Yeah, but it didn't take Arnold long after the bill's passage to start groveling!
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Old October 7, 2008, 06:01 PM   #10
Bruxley
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Concerning ownership, the Fed would 'hold the note' but the ownership remains yours. Your own the home but it is held up as collateral for the money borrowed to buy it.

Should you fail to repay according to the terms of your borrowing the money the holder of the note takes the collateral held up and becomes the owner.

That said....the Fed bought some homes. They would own them as they are buying the BAD assets (the foreclosures) that are supposedly clogging up the credit market. In short, yes, the Fed will be buying a big bunch of foreclosed homes in the form of 'mortgage backed securities'.

I heard a proposal I liked. Make those in foreclosure 'renters' until the properties can be sold. The party has an opportunity to remain in the home, the Fed (and by extension us) begins to see a return on investment on that 850 billion right away, the occupant doesn't get displaced, and the property becomes increased in value as an investment property as it already has a tenant. Ripe for those that DIDN'T mess up to make a buck or two.
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Last edited by Bruxley; October 7, 2008 at 07:37 PM.
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Old October 7, 2008, 09:24 PM   #11
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OK, this is a question that I've been dying to ask. Is anyone else skeptical of the dire consequences that were predicted should the bailout have failed? I've just got this feeling in the pit of my stomach that the direness of the situation is being exaggerated by all involved (banks, media, and politicians). I mean come on, banks were threatening not to give anymore loans unless it passed. I'm sorry but if a bank isn't giving out loans and therefore collecting interest, how does it plan to stay in business? Seems like more of an idle threat to me.
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Old October 7, 2008, 10:24 PM   #12
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I would suspect that the title of the property is irrelevant with regard to the Fourth Amendment; after all, a tenant (who merely rents and does not own) is still protected by the Fourth Amendment.

Quote:
As discussed above, both renters and owners have a fundamental Fourth Amendment right to be free from unreasonable government entry into their residences.� Camara, 387 U.S. at 528, 87 S. Ct. at 1730.
Does congressional authority to regulate interstate commerce (or intrastate commerce that affects interstate commerce) authorize the bailout?
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Old October 8, 2008, 02:27 AM   #13
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Also note...

That as of today (10/7) the market is still falling. The spin I am hearing is that we now have a "crisis of confidence", and implies that the bailout has fixed the original crisis, even though I doubt there has been any actual effect from the 700 billion authorization just yet.

I wonder what they will tell us tomorrow? And the day after?
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Old October 8, 2008, 05:32 AM   #14
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Does congressional authority to regulate interstate commerce (or intrastate commerce that affects interstate commerce) authorize the bailout?
That would be one way of looking at it. The other is to ask just what would part of the Constitution or law preclude Congress from performing the bailout.
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Old October 8, 2008, 09:44 AM   #15
IZinterrogator
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Thank you Fremmer, that was the case law I was looking for.
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Old October 12, 2008, 04:09 PM   #16
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The only reason I feel uncomfortable with the government owning homes is that, historically, the government either ends up giving land away well below its value or they violate contractual obligations when they discover they can make more money.
Bill I agree 100%. I have heard that Warren Buffet has said the government could actually make money on the deal and Paulson hinted at that on a 60 minutes segment I watched. It could be true but unfortunately since the government is not real estate or investment savvy the deal would probably be squandered and yet another opportunist would make a killing.

Quote:
OK, this is a question that I've been dying to ask. Is anyone else skeptical of the dire consequences that were predicted should the bailout have failed?
I am skeptical like you. I think had the bailout not happened, in the medium term it just would have consolidated lending institutions in a Darwinian fashion and the strongest would have survived. Like Wells Fargo maybe. In the very short term it would suppress lending but now that they passed the thing it doesn't appear that the money is free flowing or did I miss it. The stock market sure wasn't impressed Friday.

I for one do not like the hybrid nature of Freddie and Fannie. Seems like the risk is assumed by the government but profit is private. That sounds like loading +P ammo in a blackpowder handgun. May not blow up the first time but surely will eventually.
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Old October 12, 2008, 08:47 PM   #17
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IZ, I think the question has been answered.

As it is, we are straying far off topic (to which I contributed). Do you want this closed or do we need to discuss the 4th more in relation to the bailout?

Your Call.
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Old October 12, 2008, 11:34 PM   #18
IZinterrogator
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Is breaking off the off-topics and starting those as a new thread possible? I'm finding the other half of the discussion about the government's authority to do this fascinating.


ETA: Done. New Thread here.
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