Bank Lawyer's Blog

There Ain't No "There," There

2013-05-15T21:43:00-05:00

Last week, an article by Andy Peters in the American Banker hit a nerve. It profiled a California bank that had tried to make small dollar loans work as an alternative to payday lending, but had decided to give up the effort.

One PacificCoast Bank in Oakland, Calif., is regrouping as it looks to battle payday lenders in the San Francisco Bay area.

The $282 million-asset thrift recently pulled the plug on its One Pac Pal loan, which it tailored to offer low-income clients short-term credit at reasonable rates and terms. The program, which began 18 months earlier, lost too much money, says Kat Taylor, One PacificCoast's chief executive.

"We have not yet found an economically sustainable product that's sufficient to save enough people" from payday lenders, she says.

I hate to say "I told you so," but...Oh, who am I kidding. I TOLD YOU SO!From August 1, 2007:

In June, when the FDIC issued its final Affordable Small-Dollar Loan Guidelines and FDIC Chairman Sheila Bair was pressing commercial banks to compete with payday lenders for the "Mini Me" loan biz, even banks in states like North Carolina, which kicked out the bottom feeders, were rolling their eyeballs in disdain at the prospect of rushing in to fill the breach. Among other problems, the Guidelines "encourage" banks to cap the APR at 36 percent.

[...]

The North Carolina banks banks profiled in the linked article didn't believe that there was enough bang for the buck to justify dipping their toes in the shallow water. Even the lone credit union that offered a payday loan-like product wasn't making any money on it because it was barred by state law from charging more than an 18% APR and it was actually requiring the loan to be paid back in 90 days. If it had only rolled the loan over (and over and over) and neglected to comply with the usury laws, it might, like Madonna, have been able to "get into the groove" and make some real payday lender-like money.

Lyndsey Medsker, spokesperson for the Community Financial Services Association of America, which, according to another article, represents about 60 percent of the payday loan industry, said the 36% annual percentage rate cap was a non-starter for commercial banks.

"There's an effort to cap loans at 36 percent annual rate, which the FDIC guidelines suggest. How that works into two- week loans is $1.38 per $100," she says. "I know payday lenders can't make money on that, so banks couldn't possibly either."

Mr. Peters' latest article also quotes a consultant as correctly noting that at the same time these loans pose a high risk of nonpayment, they bear a high regulatory compliance risk and, because credit scores must be thrown out the window (or reliance on them reduced), a high underwriting risk. Peters also notes that the FDIC ended its small dollar loan pilot program in 2009 because banks couldn't make a return sufficient to cover the risk.

One PacificCoast bank's experience is in line with the consistent experience of other FDIC-insured banks who've tried to beat payday lenders at their own game over the past six years. Basic business principles don't change. However, they've never ceased to be ignored in the service of an ideological agenda, one which holds that payday loans are evil because they have high fees that "trap" poor people in a never-ending spiral of debt, people who are too stupid and/or unsophisticated and/or desperate to think for themselves, and who must be protected from their inherent deficiencies by those who know better. Guys like Recess Richie and the Payday Slayers.

It's obvious that trying to use traditional banks as payday lending alternatives is not going to work. Unless, of course, you let them earn the same return that payday lenders earn.Which kind of thwarts the "higher purpose," doesn't it?

That's right Liz, reality bites.

Waters Attacked By Sudden Fit Of Reason

2013-05-14T21:56:00-05:00

This past weekend, The New York Times set out to rehabilitate in the minds of community bankers the image of a woman whose performance in a congressional hearing was once described by The Atlantic's Megan McArdle as "like watching your crazy aunt challenge your boyfriend to prove that fairies aren't real." That's right, you guessed it: Maxine Waters.

The reporter describes a meeting between Mad Max(ine) and community bankers in her district in which Rep. Waters was feeling the pain of the bankers like she was channeling the mojo of William Jefferson Clinton.

“We’ve heard they chase down silly stuff,” Ms. Waters said, referring to regulators and shaking her head in disapproval. “I’m willing to take a hit” to help lower the capital requirements, she said. She even suggested the bankers hire new lobbyists to better represent them. “Influence us,” Ms. Waters said softly, reminding them of her new role as the ranking Democrat on the House Financial Services Committee. “Help us understand the intricacies of your business.”

[...]

As for Dodd-Frank, Ms. Waters said she stood ready to defend the law, but also instructed the bankers to compile a “laundry list” of their concerns. “I don’t want you to look at this as being impossible to tweak,” she said.

After an hour of swiveling nervously in their chairs, the bankers broke into grins. One executive slapped Ms. Waters a high-five. Another embraced her.

“You’ve softened,” Paul C. Hudson, the chairman of Broadway Federal Bank, teased Ms. Waters. “I love the new Maxine.”

What's up with this? Is it simply when Attila The Hun decides to ease up and only lop off the heads of the aged and infirm and spare the able-bodied, the populace reacts with an exaggerated feeling of appreciation born of a profound sense of relief, or is there something more going on here? If you need an objective analysis of a liberal icon, what better source to turn to than the notoriously fair and balanced Pravda New York Times?

The Times claims that in large part her "softening" not only toward community bankers, but toward some of the Wall Street big bankers she used to grill like burgers on a George Foreman 144-incher, is a result of her elevation to the position of ranking Democrat on the House Financial Services Committee, now that Barney Frank has retired. You'd think that circumstance might have the opposite effect: making her feel the need to out-Barney Barney in poking sticks in the eyes of bankers everywhere. After all, the opposition, which controls the committee, is traditionally a lot more pro-banker than is Ms. Waters. She might just as likely feel compelled to carry an even bigger torch for the anti-banker crowd.

The Times posits some theories.

A softer touch with the nation’s biggest banks could allow her to score points — and campaign donations — from an industry unhappy with her previous approach. And being more willing to compromise could also afford her new credibility on Capitol Hill to press her central focus — the cause of consumers.

Or maybe, as she ages, she's found that being a 24/7/365 whirling dervish of a whack job simply taxes her psyche and physique beyond human endurance.

On the down side, Ms. Waters' new-found reasonableness carries the risk of blow-back from the usual suspects.

“She should be shoring up regulators’ spines, not clipping their wings,” said Jeff Connaughton, a former lobbyist and Congressional staff member who recently wrote a book entitled “The Payoff: Why Wall Street Always Wins.” Bartlett Naylor, a policy advocate at Public Citizen, a consumer rights group, called the derivatives letter [in which Waters urged the CFTC to delay derivatives trading rules for six months] “troubling,” adding that Ms. Waters “needn’t add her voice to the cacophony from antireform Wall Street apologists.”

Yes, that's right: if you're not adhering to the politically correct ideological line, you're obviously in desperate need of internment in a re-education camp. We get it.

Finally, however, the reporter begins to get to the nub.

The ranking member on the Financial Services Committee typically takes in millions in donations from the financial services industry. As of now, Ms. Waters has received few dollars from the banking industry. Other than a recent $2,500 donation from Goldman Sachs’s political action committee, her coffers are largely stocked with money from unions and other liberal causes.

I suppose the risk of alienating donations from consumer advocates is not so large when one considers how much more scratch Wall Street can cough up. $2,500 wouldn't cover coffee and a danish at Norma's, so you know that the Goldman Sachs of the world have a lot more largesse to spread on Maxine if she just continues to "listen to reason."

This may or may not be a trend. This may or may not be real. Whatever it is, it's entertaining.

Camden Fine Fires Off A Fine Salvo

2013-05-12T21:47:00-05:00

In recent opinion piece for Bloomberg News, ICBA CEO Camden Fine was in fine fettle, ranting about his favorite topic: new regulatory burdens are strangling community while the largest banks are doing just fine, thank you very much. Among his salient points are the following:

The megabanks are benefiting from what Bloomberg View calculated is an $83 billion annual taxpayer subsidy, the value of implicit guarantees by the U.S. Treasury. Bloomberg View was correct to characterize the too-big-to-fail subsidy as “a major driver of the largest banks’ profits.”

Perversely, Federal Deposit Insurance Corp. data show that large banks have both the lowest credit quality and the lowest cost of funds in the industry. Community banks rank the highest in both categories even though they have had to compete for years against the megabanks’ access to cheaper money in pricing loans. In addition, community banks must compete against the big lenders’ lower comparative costs in handling regulatory paperwork.

While Cam complains that this is "morally wrong," I suspect that in a nation overrun with Pontius Pilates who sneer in the throes of their born-again relativism "What is 'truth'?," appealing to "morality" as a behavior influencer will have as much impact on Congress as a stern talking to by Pope Francis would have on Charlie Sheen. More effective on the morally challenged is likely to be his economic arguments.

Community banks should be putting their capital to work in the small towns, rural communities and middle-class urban enclaves they know well. Instead, they are focusing too many of their precious human resources on onerous paperwork and time-consuming compliance measures.

Community banks are the source of almost 60 percent of all small-business loans of less than $1 million, as well as mortgage and consumer loans tailored to the needs of their local communities. Large banking organizations with more than $50 billion in assets hold almost 40 percent of outstanding small loans to businesses, according to the Federal Reserve, but loans to small businesses aren’t a significant portion of large-bank lending. Small-business loans represent less than 5 percent of the large banks’ total domestic lending.

Cam outlines five specific steps Congress and the federal regulators could take to help community banks (and credit unions, for that matter, although Cam would choke on his own tongue before admitting it). They include:

Easing up on some of the more onerous residential mortgage lending and servicing rules.
Eliminating the requirement that community banks report on every new small business loan application.
Requiring a cost-benefit analysis for all new regulations and prohibiting the issuance of any regulation where the cost exceeds the benefit.
Raising the threshold to $350 million in assets for the requirement for an audit of a bank's internal controls.
Eliminating the annual requirement for sending no-change privacy policies.

These are all helpful suggestions, but I'm frankly surprised that he didn't also call for the carpet bombing of CFPB's D.C. headquarters and insist that Jamie Dimon's king-size bed be short-sheeted. Oh well, the year is not even half over. There's still time to get down to the really important stuff.

Charlie Munger: A Favorite Curmudgeon

2013-05-09T21:47:00-05:00

Warren Buffet's long-time running buddy, Charlie Munger, agrees with Cam Fine about one thing: it's time to break up (or at least "simplify") the big banks.

In an interview with CNN at Berkshire Hathaway's annual meeting, Munger, who is Warren Buffett's chief lieutenant, said he thinks the big banks are still too complicated and dangerous for the economy. But he doesn't think a recently proposed bill by Senators Sherrod Brown and David Vitter, which has gotten praise from others who want to rein in big banks, is the answer.

"I think if you increase the capital requirements and let them do what they want, they will just get in trouble again," says Munger.

Munger's preferred prescription sounds like a stricter version of the Volcker Rule, which was meant to limit risky trading at the banks and was included in Dodd-Frank, but has yet to be implemented. He would force the banks to get out of their business of underwriting and trading derivatives, financial contracts that allow you to speculate, some say hedge, on commodities, interest rates, and other things. About a year ago, JPMorgan Chase (JPM) announced it had lost billions on a credit derivative hedge that had not worked out as expected.

As CNN reporter Stephen Gandel notes, Munger's words carry additional weight, because he's calling for action against banks like Wells Fargo and Bank of America, institutions in which Berkshire Hathaway has sizable investments.

Munger thinks that big banks should be more heavily regulated, and that more regulation will be just what the profit doctor ordered. "By getting out of risky businesses, banks may end up giving back much less of their bull market gains in the down years" He thinks that banks should stick to their knitting, lending. "The ideal bank is pretty boring." I agree.

Gandel thinks that if Munger actually believes that more regulation and smaller size lead to greater profits, then he has a fiduciary duty to Berkshire's shareholders to press banks like Bank of America to pare down their size and accept tighter regulation (instead of unleashing the lobbyists on Congress).Munger thinks that's the job of the regulators. I'd argue it's the role of Congress, but I'd also agree with Munger that Berkshire Hathaway isn't going to persuade Bank of America to accept being broken up or buried under an avalanche of more regulation.

Munger said he and Buffett make investment decisions based on the world they are in, not what they wished it to be, which is fair.

Like Buffet, Munger has always pretty much said what he thinks. As he ages, he's not becoming any less candid. It makes for an interesting interview.

The OCC Takes A Body Shot

2013-05-08T21:57:00-05:00

Housing Wire's Jacob Gaffney was kind enough to turn readers on to a recent snark-fest by John Stewart, in which he turned the heat up on both MERS and the OCC. It's a rare day when you have an audience howling over financial esoteria. For those, like yours truly, who missed this segment, enjoy!

The Daily Show with Jon Stewart

Mon - Thurs 11p / 10c

Residential Evil

www.thedailyshow.com

Daily Show Full Episodes

Indecision Political Humor

The Daily Show on Facebook

A New Approach To Compliance

2013-05-06T21:52:00-05:00

Steve Van Beek, NAFCU's Director of Regulatory Compliance, has a dynamite article in the latest issue of The Federal Credit Union, that community banks, as well as credit unions, would do well to heed. In addition to noting the obvious fact that Dodd-Frank's increase of regulations means increased compliance burdens for credit unions, he discusses a very important "paradigm shift" in the way credit unions (and community banks) need to view compliance. In the years "BFD" (Before Franken-Dodd), the compliance officer was often brought into the discussion of a product or service at a late date, and then gave it a thumbs up or thumbs down verdict. Steve rightly notes that the old school approach is a good way to be schooled by the CFPB.

Steve observes that the "CFPB's focus is principle-based as wellas requirement-based."

Not only will credit unions need to determine if their product or service is compliant with laws, regulations and guidance, but they will also need to expend resources to document that the product or service provides a benefit to members.

Why? Steve's glad you asked. Th answer is UDAAP: unfair, deceptive or abusive acts or practices. You have a new sheriff in town, the CFPB. It's focused on how consumers use products and services and how consumer service and product providers might "take advantage" of consumers. In other words, the CFPB seems to be running down the path of determining what products and services are "suitable" for consumers and which are not. It's a brave new world, one in which the old focus on checking off items on a compliance checklist is not going to get the job done. Instead, financial institutions will "need to build a UDAAP review into their product structure and development and monitor their products and services over time, as the UDAAP standard is not static."

There's a lot more meat on the bones, and I highly recommend that you read the whole article. It's a good warning shot across the bow of the critically dysfunctional and soon-to-be-beaten-down dinosaurs who squawk an outdated mantra: "Show me where it says I can't do that." Believe me, if you don't understand that it's a whole knew compliance ballgame and learn the new rules, pronto, the CFPB tire tracks will make a nice pair of bookends on the back of your bowling shirt as you lie face down and flattened in the middle of the consumer compliance highway.

The CU-Bank War Is Getting Ugly

2013-05-05T21:51:00-05:00

Crying "The Time Is Right To Tax," commercial bankers are upping the thermostat on state and federal regulators to "level the playing field" by eliminating the tax exempt status of credit unions. According to the ABA Banking Journal, in a recent panel discussion at the American Bankers Association's 2013 Government Relations Summit, bankers of all stripes, including a CEO of a bank that was once a credit union, took the position that in this time when Congress and just about every state legislature is looking for ways to raise revenues without raising tax rates, the opportunity exists to convince legislators that tax exempt status for the credit union industry is an idea whose time has passed.

Panel member Ken Kies, managing director of the Federal Policy Group lobbying consultancy, spent years in Washington tax-writing roles, and believes banks could pursue a change.
"Frankly," said Kies, who's working with ABA, "I'm not sure that the environment has ever been better than it is today."

Kies indicated that no one should think that "not taxed" means "never to be taxed." History has not only seen many attempts to subject tax-exempt organizations to federal tax, but success in those attempts. Today's congressional urge towards tax reform, even on a revenue-neutral basis, could be the factor that pushes credit union taxation into reality.

In 1986, tax legislation pulled Blue Cross and Blue Shield organizations under the tax umbrella, reflected Kies. And a year later, the TIAA/CREF benefits organization likewise got shifted. And savings institutions lost their tax-favored status decades ago, and remain a viable part of the financial services business.

Mr. Kies also mentions the fact that there's a trillion dollar federal deficit that makes this the best time to press the case. However, he does not mention by how much that deficit would be reduced by taxing credit unions, which ought to show up somewhere in the argument if it's to survive counter attacks.

Meanwhile, In Illinois, the hate-fest between banks and credit unions rages on.

Linda Koch, CEO of the Illinois Bankers Association, wrote an op-ed piece for The State-Journal Register in that state's capitol city, in which she sang the same tune as the ABA panelists.

She took the additional step of citing the CBO to the effect that CU tax exemption costs the federal government $2 billion a year in "lost revenue" and the state of Illinois $25 million. I don 't know what the state of Illinois's budget deficit is, but I do know that $2 billion in additional tax revenue is a drop from an eye dropper in a Pacific ocean of federal spending that, according to the Heritage Foundation, reached $3.6 trillion in 2012 and is expected to reach $5.5 trillion by 2022. To me, contributing such relatively small amounts to the black hole of government spending is an argument that lacks weight. I'd prefer that banks stick to the fact that if credit unions want to be "more like banks" (in other words, make commercial loans), they can pay the same freight that goes with that business model, including income taxes. You want to waddle, quack, and fly like a duck, but be pampered like a golden goose. Sorry, leveling the playing field on the powers side ought to come with a leveling of the playing field on the taxation side. Otherwise, you really are gaining an unfair competitive advantage.

The CEO of the Illinois Credit Union League, Dan Plauda, responded to Ms. Koch with the argument that tax revenues from credit unions in Illinois won't solve Illinois' revenue shortfalls. That's most likely very true. However, he also alleges that taxing credit unions will hurt their members, who rely on deposit rates that are much higher than banks pay and consumer loan rates that are much lower than those charged by banks. To me, that makes the banks' case, that tax exemption gives credit unions an unfair competitive advantage on the same deposits and loans that banks fight for. It seems to weaken the case for credit unions to intrude further into the commercial banks' sacred ground of commercial lending.

Mr. Plauda talks about how credit unions are member owned, "democratically controlled," and manned by volunteers. He also alleges that all "excess revenues" are plowed back into the credit union. By "excess revenues, he means what would otherwise be deemed "profits." I started out my career as a bank lawyer in-house for a large mutual savings bank. The only practical difference between a stock-owned commercial bank and a member-owned mutual is that, by soliciting proxies from members who don't give a rip about anything other than services and rates, management of a mutual is, in many cases, able to "rest easy" from all those pesky shareholders who demand the distribution of "profits" either in the form of higher stock prices, dividends, or both. At the same time, there's not exactly a lot of oversight on salaries and cash bonuses that are deducted from gross revenues before the "excess revenues" are calculated.

Mr. Plauda finished his piece with a flourish.

This “people helping people” approach to financial services helps explain why credit unions have become so popular in recent years. As new bank fees have proliferated, for instance, Americans have moved to credit unions in droves. Last year alone, credit unions nationwide added more than 2 million net new members — the biggest annual net member growth in 15 years.

Today, more than 96 million people belong to credit unions.

If anyone seriously thinks that folks flocked to credit unions because credit union members feel like they are part of a movement of "people helping people," as opposed to the financial incentives of lower loan rates and higher deposit rates, both possible because of CU's tax exempt status, that person needs a reality transplant. It just seems to me that responding to banks' call for the end of credit union tax exempt status by taunting banks with the line "we're stealing your customers by the boxcar-load" is going to make even the densest legislator wake up and smell the coffee, eventually.

Both sides of this debate need to sharpen their arguments. If they're able to do so, that is.

Thanks to a loyal reader from Illinois for links to the Illinois op-ed pieces

Community Bank Consolidation: Over-Hyped?

2013-05-02T21:48:00-05:00

I've been traveling on business this week and have missed posting the past couple of days, but I couldn't let the week end without commenting on a story in yesterday's American Banker, the tone, and much of the substance, of which, was that bank merger activity is stagnant and is not likely to improve in the near term. I'm not as gloomy.

Aside from the fact that our boutique firm is currently involved in a half-dozen deals, I attended a banking conference last Friday in Dallas (actually, the Four Seasons Resort in Las Colinas) hosted by Commerce Street Capital, in which that firm's head of M&A, former OTS Western Regional Director C.K. Lee, circulated some interesting statistics. One was that the total number of M&A transactions last year nation-wide was 230, the highest since 286 in 2007, before the crash. 39 of those were in the Southwest. In the first quarter of this year, there were 44 transactions, 8 of them in the Southwest. I was in Denver the last few days, and had lunch yesterday with an investment banker whose firm is heavily involved in M&A activity in Colorado and surrounding states, and he's also currently juggling a handful of deals at the moment.

While all of this is not exactly a raging inferno of M&A, it's not as depressing as the folks the American Banker interviewed made it out to be. There's no question that potential buyers who feasted on FDIC loss-sharing and the cheap prices they paid for failed banks are not enamored of sellers who want an actual premium over tangible book value. It's also true that, in some areas of the country, the bid/asked gap between sellers and buyers is wide. However, in some areas of the country, deals are getting done and there are more in the hopper.

Therefore, while I agree that the predictions of some pundits that there would be a "tsunami" of community bank consolidation this year will not prove to be true, I also think that as agencies like the CFPB continue to work their magic on the psyches of community bank owners, directors, and senior managers, and as the ownership of many closely-held community banking organizations continues to age, there will be more mice who decide that they no longer want the cheese, they just want out of the trap.

Then again, as Dennis Miller would put it, that's just my opinion. I could be wrong.

A Change of Policy, But Only in Two States

2013-04-29T21:43:00-05:00

While the epic "Yo Mamma" wars between banks and credit unions have been well-documented (and often lamented) on this blog, I have no explanation for the recent activities of Chase Bank and Huntington Bank, as outlined in a recent article in Credit Union Times.

As many as 30 credit unions in West Virginia and Ohio have been scrambling to establish new correspondent vendors after a regional and national bank terminated their accounts over the past few weeks.

The $1.4 billion Volunteer Corporate CU and the $3.7 billion Corporate One FCU both reported the closed accounts, and in both cases said members reported the banks cited Bank Security Act and money laundering risk.

Charlie Thomas, VolCorp’s senior vice president of West Virginia operations, said the Nashville, Tenn.-based corporate first became aware of the terminated correspondent relationships in late March when a member called, asking for assistance. He said the two banks were the Columbus, Ohio-based Huntington Bank and New York-based Chase Bank.

[...]

Thomas said a letter he’d seen from Huntington to a credit union said the decision to terminate the business relationship was the result of regulatory requirements, “some of which may be new or been amended since the credit union opened its account.” The decision reflected a change in bank wide strategy, and was not a reflection on the credit union, the letter added.

The two banks aren't providing a more detailed explanation and the Fed refuses to comment to reporters on the matter, including indicating whether the banks were directed to close the accounts by their primary regulators because of BSA concerns. Speculation includes the theory that the banks are trying to reduce volatility of deposits, but other observers note that those banks are so large that the 30 banks would be but a blip on the radar screen. Also, why only banks in those two states? Is there some massive money laundering risk suddenly emerging from coal country? Are moonshiners now allied with Mexican drug cartels and laundering massive amounts of illicit cash through these credit unions?

This may be worth following. Or, it may not be. If anything interesting pops, I'll post.

A Bad Idea That Refuses To Die

2013-04-28T12:30:38-05:00

Even though municipalities like San Bernardino have come to their senses and dropped a make-your-investment-banker-rich-quick scheme to seize underwater mortgages from mortgage lenders and wrote down the principal balances, the scheme refuses to completely die. I guess we'll have to use holy water, garlic, mirrors, fire, crucifixes and wooden stakes to stamp it out. In the interim, SIFMA continues to publicly pummel it.

In a recent post on its Pennsylvania + Wall blog, SIFMA's Timothy Cameron reiterates why those municipalities still considering this likely unconstitutional scheme to abandon it.

The proposals being touted target a very narrow slice of homeowners – those that are in private-label MBS and who are current on their existing mortgages, have good credit, and ideally don’t have existing home equity loans or other liens on the property. Those who are behind on their mortgage payments or have poor credit (which is the vast majority of homeowners needing help) will get no relief.

Within the small pool of qualifying homeowners, the proposal, on its face, will substantially undervalue their homes. In one example, the mortgage that investors would get paid $160,000 for is refinanced shortly thereafter for $190,000, with much of the additional $30,000 going to the plan’s backers after costs and a kickback to the municipality are accounted for. This is not fair compensation, since the amount paid is well below the face value of the taken note, and significant profits accrue to private parties.

In addition to the legal issues, the use of eminent domain will also be immensely destructive to U.S. mortgage markets in general and to specific communities using eminent domain, in particular. If the sanctity of the contractual relationship between a borrower and a creditor is undermined by the use of eminent domain, both lenders and investors will be reluctant to provide funding in the future. The result will be a significant contraction of credit availability, particularly in communities that have exercised eminent domain to seize loans. It will be much harder to get a loan: any loans that are granted will likely require much larger down payments, stronger credit scores and higher interest rates to compensate for this new and unprecedented risk. This contraction of credit availability would likely serve to halt any recovery in the municipality’s housing market, and could further depress housing values in the cities using eminent domain.

The last reason may be the most telling. Good luck with the future availability of affordable residential mortgage credit in your soon-to-be dustbowl of a community if you enact this scheme. The investment fund gets wealthy, of course, which is the impetus for this half-baked plan. All to help, but not so much, a narrow slice of the community.

Bad ideas never die. They never seem to fade away, either, unfortunately.