Property Rights

Live Streaming at 11:00 AM EDT — Securing Property Rights in Space

by Ryan Radia on April 5, 2012

in Economy, Features, Property Rights, Regulation, Space, Zeitgeist

Securing Property Rights in Space

On Thursday, April 5, the Competitive Enterprise Institute will host a Capitol Hill briefing to introduce a new study by Adjunct Scholar Rand Simberg: Homesteading the Final Frontier: A Practical Proposal for Securing Property Rights in Space.

The right to claim, develop, and trade property and particularly real estate has been the driving force of human exploration throughout history. Currently, this right does not exist off planet, and its absence is discouraging real investment in space development. Rand Simberg argues that the U.S. should recognize off-planet land claims by private groups and individuals under certain conditions. The proposed Space Homesteading Act outlines appropriate conditions, including mandates that claimants offer land for sale and ensure commercial space transportation to settlements.

Some scholars argue that the 1967 Outer Space Treaty and the 1979 Moon Treaty preclude any nation from recognizing private property claims in space. Simberg responds to these arguments in detail and makes his case for why the Outer Space Treaty does not in fact outlaw private property claims and why the U.S. should repudiate the Moon Treaty, to which it is not a signatory.

Rand Simberg will present his study and answer audience questions at Thursday’s Capitol Hill briefing. Also speaking at the briefing will be Iain Murray, Vice President for Strategy at CEI, and James E. Dunstan, Senior Adjunct Fellow at TechFreedom and an attorney specializing in space issues.


Streaming Live by Ustream

Supreme Court Affirms Right to Challenge Government Power Grabs in Sackett v. EPA; Justice Alito Cites CEI Amicus Brief

by Hans Bader on March 21, 2012 · 7 comments

in Economy, Environment, Features, Legal, Property Rights

Post image for Supreme Court Affirms Right to Challenge Government Power Grabs in <i>Sackett v. EPA</i>; Justice Alito Cites CEI Amicus Brief

Rejecting the arguments of the Obama administration, the Supreme Court has just held that EPA “compliance orders” can be challenged in court if they are arbitrary and capricious — for example, if they are based on an erroneous bureaucratic interpretation of what a “wetland” is, that results in dry land improperly being declared an unusable wetland. In his concurring opinion, Justice Alito explained one reason why such judicial review is needed: the EPA uses vague, inconsistent standards when it declares seemingly-dry land to be a wetland. As he pointed out, citing CEI’s amicus brief, “far from providing clarity and predictabil­ity, the agency’s latest informal guidance advises property owners that many jurisdictional determinations concern­ing wetlands can only be made on a case-by-case basis by EPA field staff. See Brief for Competitive Enterprise Institute as Amicus Curiae 7–13.”

The EPA has a practice of issuing “compliance orders” to property owners telling them to stop using their land and restore it to its prior condition, under penalty of $37,500 a day in fines, and declaring in such orders that such land is a federally protected wetland. It then waits months or years before actually suing the property owner for the fines, which accrue daily, potentially adding up to millions in fines. But in the meantime, it insists that the property owners can’t challenge its claim that their property is a non-usable wetland in court. If they want to take issue with its claim that their property is a “wetland,” they have to wait until the EPA sues them later on to collect those fines, after they’ve racked up potentially millions in fines under the compliance order.  The order doubles the fines that a judge can impose on the property owners when the EPA ultimately sues them, although if the judge later finds the land was not in fact a “wetland,” he can refuse to impose the fines. (In the absence of a “compliance order,” the maximum fine for developing a wetland is $37,500 a day; the compliance order adds another $37,500 per day, bringing the total to $75,000 per day.  Federal law has a broad and counterintuitive notion of what is a “wetland”: for example, in one court ruling, the government was allowed to declare a property to be a “wetland” even though it appeared dry, since water occasionally passed from it into a roadside ditch that in turn flowed into another ditch that flowed into a creek).

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$26 Billion Mortgage Settlement Rips Off Investors to Trim Banks’ Massive Costs of Bailing Out Deadbeat Borrowers

by Hans Bader on February 10, 2012

in Bailout Watch, Economy, Legal, Politics as Usual, Property Rights, Zeitgeist

The $26 billion mortgage settlement announced yesterday is bad news for “bond investors including pension funds, according to Pacific Investment Management Co.’s Scott Simon,” notes Bloomberg News.  He says that the settlement rips off innocent investors and pension funds in order to reduce the banks’ costs of bailing out delinquent mortgage borrowers and others.  (As we noted earlier, the Justice Department, state attorneys general, and the biggest banks reached an agreement to provide $26 billion to delinquent mortgage borrowers and others, such as left-wing housing counseling similar to ACORN — in what the New York Post calls a “deadbeat bailout”).  As Simon notes,

“They’re using other people’s money to pay for a ton of this. Pension funds, 401(k)s and mutual funds are going to pick up a lot of the load.”

Asset managers are frustrated with the deal because, in addition to the debt the banks own, it gives credit to the lenders for changes to loans they hold no interest in and oversee for investors. That “treats people’s 401(k)s and pensions,” which hold mortgage securities, “like perpetrators as opposed to victims,” Simon said. The deal comes after all 50 states announced a probe into foreclosures in 2010 . . . costing bondholders as liquidations of bad debt were delayed.

“Think about this, you tell your kid, ‘You did something bad, I’m going to fine you $10, but if you can steal $22 from your mom, you can pay me with that,’ ” Simon said yesterday. . .

Laurie Goodman . . . who has advocated for mortgage forgiveness in testimony to Congress, joined him in criticizing the agreement yesterday. . .“There is a difference between principal reductions and giving banks credit for spending others’ people money.”

As we noted earlier, by ripping off mortgage investors, this deal will make investing in mortgages more risky, which will in turn drive up interest rates that homebuyers have to pay in the future.  This deal only covers borrowers at certain banks, not those borrowers who mortgages are held by the government-sponsored mortgage giants Fannie Mae and Freddie Mac, which (unlike the private banks) have never repaid their bailout, and are currently still being bailed out at an ever-increasing tab of $170 billion.

This deal is not the only way that federal and state officials are messing up the housing market.  The Obama administration is forcing banks to make risky loans (in the name of “fair lending”), thus planting the seeds of a future financial crisis. The Justice Department is suing banks that refuse to do so, and forcing them both to award preferential loans based on race, and to cough up money in “settlements,” some of which goes to left-wing “community” groups.

The Obama administration recently launched a multibillion dollar bailout for speculators. Bloomberg News reported that the administration is vastly expanding aid for certain “delinquent homeowners,” paying banks up to 63 cents for every dollar in principal they write off for such homeowners.  Speculators will benefit, because bailout recipients don’t even have to live in a house to get its mortgage principal reduced at taxpayer expense.

CEI Files Amicus Brief in Magner v. Gallagher, to Guard Against Financial Meltdowns and Racial Preferences

by Hans Bader on January 5, 2012 · 2 comments

in Features, Legal, Property Rights, Regulation

Post image for CEI Files Amicus Brief in <i>Magner</i> v. <i>Gallagher</i>, to Guard Against Financial Meltdowns and Racial Preferences

To help prevent another financial crisis, CEI helped file an amicus brief in a pending Supreme Court case, Magner v. Gallagher. The case tests whether race-conscious “disparate-impact” causes of action can be judicially read into laws, like the Fair Housing Act, that ban racial discrimination, effectively turning the colorblind intentions of such laws upside down. “Disparate impact” is when a neutral policy happens to impact more minorities than whites, like a standardized test that whites pass at a higher rate than some minority group, even though test scores are calculated the same way for members of all races. The Supreme Court sometimes declines to interpret anti-discrimination statutes as banning neutral practices that have a “disparate impact,” but in other cases, it interprets then as banning “disparate impact,” deferring to the statutory interpretation of civil-rights agencies, like the EEOC, that like “disparate impact” rules because they expand agencies’ power to regulate businesses and interfere with their race-neutral criteria for things like hiring, lending, or leasing apartments.

Banks and mortgage companies have been under pressure from lawmakers and regulators to give loans to minorities with bad credit, in order to avoid liability for “racially disparate impact,” and to provide “affordable housing” and promote racial “diversity.” (Recently, the Obama administration has ratcheted up such pressure, demanding that targeted banks make preferential loans to minorities with bad credit, notes Investor’s Business Daily, extracting such racial preferences in recent settlements with banks.) Such pressure played a key role in triggering the mortgage crisis, judging from a story in The New York Times. For example, “a high-ranking Democrat telephoned executives and screamed at them to purchase more loans from low-income borrowers, according to a Congressional source.” The executives of government-backed mortgage giants Fannie Mae and Freddie Mac “eventually yielded to those pressures, effectively wagering that if things got too bad, the government would bail them out.” Taxpayers have now spent $170 billion bailing them out (and unlike the private banks, which repaid their bailouts, Fannie and Freddie never have, and never will, repay their bailouts, which continue to expand monthly).

In the amicus brief in Magner, Pacific Legal Foundation attorneys note that the legislative history and plain language of the Fair Housing Act does not support a disparate-impact cause of action, contrary to the Obama Administration’s claims. (CEI and the Cato Institute joined the Pacific Legal Foundation’s amicus brief, along with the Center for Equal Opportunity.)

The brief also contains two arguments that I’ve previously made, such as the fact that deferring to the Obama administration’s recent interpretation of the Fair Housing Act as including a “disparate impact” cause of action would violate a principle of statutory interpretation known as the canon of constitutional doubts, and the fact that it conflicts with the federalism canon of statutory construction set forth in the Supreme Court’s decision in United States v. Bass.

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Hank Greenberg Rises Again — Takes on Treasury, NY Fed in “Takings” Lawsuit

by Fran Smith on November 22, 2011

in Economy, Features, Legal, Property Rights

Post image for Hank Greenberg Rises Again — Takes on Treasury, NY Fed in “Takings” Lawsuit

Feisty 86-year-old Hank Greenberg, long-time chief executive of AIG, is suing the Treasury Department and the New York Federal Reserve Bank charging that its 80 percent takeover of AIG in 2008 was unconstitutional. The suits, brought by Starr International and other AIG shareholders, say that the takeover violated the Fifth Amendment by taking property from those shareholders and using the company to transfer federal monies provided to AIG to banks that were trading partners of the insurer. The lawsuits seek damages of at least $25 billion. The “takings clause,” widely used to defend against eminent domain appropriation, reads “nor shall private property be taken for public use, without just compensation.”

Greenberg is no stranger to legal controversies. He was the target of former NY State Attorney General Eliot Spitzer’s zeal, and it was widely bruited that Spitzer demanded Greenberg’s dismissal after 36 years at the helm of AIG or he would bring down the company. Greenberg left the company in 2005 and faced charges from Spitzer, the SEC, and the U.S. Justice Department, with the criminal charges subsequently dropped and some civil charges still unresolved.

CEI Podcast for November 10, 2011: Eminent Domain Abuse

by Ryan Young on November 10, 2011

in Podcast, Property Rights

Have a listen here.

Land-use and Transportation Policy Analyst Marc Scribner explains why allowing the government to seize land from its owners and give it to developers is a bad idea. Voters in Mississippi agree; on Tuesday they overwhelmingly passed a ballot initiative that would place limits on eminent domain abuse. Marc discusses the pros and cons of Mississippi’s initiative and the prospects for reform in other states.

Mississippi Voters Pass Initiative Restricting Eminent Domain Powers

by Marc Scribner on November 9, 2011 · 1 comment

in Economy, Personal Liberty, Property Rights

Yesterday, voters in Mississippi overwhelmingly passed Initiative 31, which will limit eminent domain condemnations for private benefit. Despite opposition from Republican Governor Hailey Barbour, 73 percent of voters supported amending the state constitution to prohibit that any “property acquired by the exercise of the power of eminent domain under the laws of the State of Mississippi shall, for a period of ten years after its acquisition, be transferred or any interest therein transferred to any person, non-governmental entity, public-private partnership, corporation, or other business entity” [PDF].

So following condemnation, the government condemner cannot transfer the property to any private party for 10 years. Initiative 31 granted the following exceptions:

(1) The above provisions shall not apply to drainage and levee facilities and usage, roads and bridges for public conveyance, flood control projects with a levee component, seawalls, dams, toll roads, public airports, public ports, public harbors, public wayports, common carriers or facilities for public utilities and other entities used in the generation, transmission, storage or distribution of telephone, telecommunication, gas carbon dioxide, electricty, water, sewer, natural gas, liquid hydrocarbons or other utility products.

(2) The above provisions shall not apply where the use of eminent domain (a) removes a public nuisance; (b) removes a structure that is beyond repair or unfit for human habitation or use; (c) is used to acquire abondoned property; or (d) eliminates a direct threat to public health or safety caused by the property in its current condition.

This is a huge step forward in protecting the rights of Mississippi property owners, although George Mason University law professor Ilya Somin explains why it isn’t perfect (note the above exceptions). Governor Barbour has long opposed enhancing property rights protections on the grounds that eminent domain condemnations for private benefit are necessary to promote economic growth. Reason magazine’s Damon Root wrote about crony capitalist Barbour’s veto of reform legislation in 2009.

In 2010, I explained in a CEI OnPoint whitepaper [PDF] why policy makers should be extremely skeptical of eminent domain condemnations used to promote planned redevelopment and economic growth. It was the U.S. Supreme Court’s infamous 2005 Kelo v. New London decision that set off a nationwide movement to restrict takings abuse, and Mississippi becomes the 44th state to react to the Supreme Court’s awful ruling. Now in 2011, the Kelo site cleared to make way for a planned mixed-use development project (since shelved) still remains empty.

Spectrum Crunch Hype is No Scam

by Luke Pelican on November 2, 2011 · 1 comment

in Property Rights, Tech & Telecom

In a recent Washington Times op-ed, Mark Hyman of the Sinclair Broadcast Group makes some compelling arguments calling for a spectrum inventory. His suggestion that the NTIA and FCC fulfill their mandate from President Bush in 2003 to increase spectrum efficiencies is on point and laudable. It’s certainly true that plenty of spectrum currently sitting in government hands could be put to better use, and thus a part of the problem is spectrum management. But that’s about all Hyman gets right.

His assertion that the “looming spectrum crisis” is a ruse manufactured by FCC Chairman Genachowski and parroted by major cell phone companies is completely erroneous. Hyman points to “the only independent study” on this subject to support this claim, one conducted by Citigroup. That report claimed that cellular companies were using just a fraction of the spectrum assigned to them. Critics have since eviscerated the Citigroup report, pointing to its use of outdated figures and misunderstandings of mobile technology as the cause of its flawed and ultimately inaccurate conclusions.

Hyman also alludes to public statements from Sprint and Verizon as proof that no spectrum crunch exists. Yet this September Verizon’s CEO declared that the AT&T / T-Mobile merger “was kind of like gravity” and had to happen in part because of the government’s inability to get sufficient amounts of spectrum to carriers. Such a statement bolsters claims that we do in fact face a spectrum crunch.

The FCC was actually aware of this problem at least as far back as 2002, when the Spectrum Policy Task Force issued its report. That report detailed how FCC’s allocations of spectrum in 1994 were based on predictions that there would be 54 million mobile users by the year 2000. In 2000 however the number of mobile users was more than double that base amount; the authors explained that the FCC and industry “have significantly and consistently underestimated the need for additional spectrum and the public’s utilization of new technologies and applications.”

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Wealthy Chanhassen, Minnesota, NIMBYs Oppose Retail Competition, Support Development Socialism

by Marc Scribner on November 2, 2011 · 5 comments

in Features, Property Rights, Regulation, Sanctimony

Post image for Wealthy Chanhassen, Minnesota, NIMBYs Oppose Retail Competition, Support Development Socialism

Reading the tired, silly claims of left-wing, anti-Wal-Mart activists generally makes me yawn. But it annoys me to see some of my former neighbors from my hometown of Chanhassen, Minnesota, going around trampling on property rights and opposing the liberalization of the real estate market.

Let’s start with a demographic profile of modern Chanhassen. When my parents moved our family there in the early 1990s, large parts of the city were still undeveloped. It was on the fringe of the southwestern Minneapolis suburbs. Since then, the city has developed rapidly due to its close proximity to the Minneapolis-St. Paul core — leading to population doubling over the past two decades, with most of the growth coming from upper-middle class families with children. According to the 2010 Census, households are quite wealthy, with 48.6 percent of them earning at least $100,000 annually. Only 2.1 percent of families are below the poverty level, with the median family income hovering around $113,000 annually. High-quality housing, good schools, and recreational amenities abound. Things are so great in Chanhassen that Money magazine ranked it #2 on their 2009 list of Best Places to Live in the United States (it appeared at #10 in the nation in 2011).

Locals are fond of these mostly arbitrary rankings, almost as fond as some of them are in believing Wal-Mart will destroy their quality of life if the mega-retailer is allowed to open a store in Chanhassen. After several hundred angry, presumably wealthy NIMBYs showed up at a recent Planning Commission meeting to demand that a site currently occupied by a large vacant building not be put to productive use (yes, you read that correctly), the notoriously anti-development Commission denied the Wal-Mart request for a necessary upzoning (a designation that permits more intense development). It is now up to the City Council to decide whether or not it will listen to the city’s planning apparatchiki.

A couple of the irate NIMBYs, after finding a free website template online, created an online activist group called “Chanhassen1st.” For a city long known for its support of conservative Republicans (George W. Bush was the first president to visit Chanhassen in the run-up to the 2004 election and put on a huge rally for supporters), I found it odd that the Firsters were regurgitating the faux-arguments manufactured by multi-million dollar astroturf organizations funded by the United Food and Commercial Workers union (due to Wal-Mart ostensibly believing the same thing about unions as Whole Foods founder and CEO John Mackey: “The union is like having herpes. It doesn’t kill you, but it’s unpleasant and inconvenient, and it stops a lot of people from becoming your lover.”) and citing a propaganda film by far-left “documentary” filmmaker Robert Greenwald (perhaps most famous for directing the 1980 Olivia Newton-John box office flop “Xanadu”). Oh, and a barely-sourced article written by a North Carolina State University economist that does not even conclude that Wal-Mart’s entry results in net negative economic effects.

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Can Fraud Be Immunized by Giving the Defrauder Certain Governmental Powers Over the Victims?

by Hans Bader on October 26, 2011 · 1 comment

in Economy, Legal, Personal Liberty, Property Rights

Can a private organization that has been delegated some government regulatory powers claim absolute government immunity against lawsuits when it engages in fraud against those it regulates — even when the fraud is at most distantly related to its regulatory functions? Amazingly enough, an appeals court said yes — a ruling that conflicted with another appeals court’s ruling — and the Supreme Court is now being asked to reverse that decision.

The Competitive Enterprise Institute joined Cato Institute in filing an amicus brief asking the Supreme Court to review that disturbing ruling shielding wrongdoing. The brief, which cites constitutional safeguards and separation-of-powers principles, can be found here. The case is Standard Investment Chartered v. National Association of Securities Dealers (NASD). NASD converted into an entity called FINRA after deceiving regulated members about the terms of the conversion. (FINRA’s CEO was shortly thereafter appointed by President Obama to head the federal Securities and Exchange Commission.)  Cato Institute’s Ilya Shapiro describes the significance of the case here.

Forbes has an interesting article on the case by Edward Siedle. As he puts it:

Should FINRA, the brokerage industry’s self- regulatory organization, have absolute immunity from lawsuits—even when FINRA issues a false and misleading proxy statement to its membership? As a former SEC attorney and owner of a FINRA-member brokerage for more than 20 years, in 2008 I thought the answer to this question was pretty simple. Almost four years later, I’m still waiting to learn whether FINRA is accountable to anyone.

Back in 2008 I was well aware that the degree of control FINRA had over the investing public was both remarkable and disturbing. . . .self-regulation of the brokerage industry involves an inherent and insurmountable conflict of interest. . . Investors pay a heavy price for conflict ridden self-regulation. . .[NASD boasted that] “The NASD has successfully resisted many proposals inimical to the best interests of . . . its members.” Very revealing—no pretense of concern for the nation’s investors in that boastful line.

Despite this unique history of largely unchecked power over investors, as a former securities regulator I figured there were limits to how far this maniacal monster could go. I was confident that if FINRA, an organization responsible under the law with regulating the truth and adequacy of statements by members of the brokerage industry, lied about the terms of a financial transaction, FINRA, like anyone else, would be held liable.

In 2008, my brokerage firm, Benchmark Financial Services, Inc. filed a class action lawsuit against FINRA on behalf of all FINRA-member firms alleging that FINRA had issued a false and misleading proxy statement to its members in connection with the merger of the NASD and NYSE. Also named as a defendant in the suit was its then Chairman and CEO, Mary Schapiro—the current Chairperson of the Securities and Exchange Commission. . .. The lawsuit focuses chiefly on the truth of statements made about a $35,000 payment that was made by the NASD to induce its members – firms such as Benchmark – to vote in favor of the merger of the NASD and NYSE. The merger closed in July 2007 leading to the creation of FINRA. . .. [NASD falsely] stated in the proxy statement that the tax code and the Internal Revenue Service had imposed a $35,000 ceiling on the payment to NASD members in connection with the merger. Through the course of the litigation, I learned that a much higher payment to NASD member firms was not only possible but feasible. In actuality, the NASD did not even receive an IRS ruling with respect to the payment until months after the proxy statement was issued to NASD members. Documents that the NASD subsequently filed with the SEC made it clear that the NASD’s mantra that the tax code imposed a $35,000 limit on the payments to NASD members was simply untrue. The IRS did not issue a private letter ruling to the NASD concerning the payment to members until March 13, 2007, nearly four months after the proxy was issued and nearly two months after the voting had closed. OK—so NASD fabricated the claim that the IRS limited the payment to a maximum of $35,000 . . .. Here’s the killer: The IRS private letter ruling . . . did not provide any specific limitation on the payment to NASD members. Instead it provided a range of permissible payments that would not affect the self-regulatory organization’s tax exempt status.

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