Learning from City of Richmond, CA, Fight Against Walls Street Banks

The City of Richmond, California, has taken the lead in the fight against Wall Street banks in order to protect homeowners who have mortgages under water.  Through the legal concept of "eminent domain," the city intends to use its power to force banks to the negotiating table.  Eminent domain is a State power that permits compulsory expropriation of private property for public interests.  The City of Richmond, California, proposed a re-negotiation of mortgages to some of the largest banks in the nation with the threat that the city will exercise its power of "eminent domain" to repossess the properties and sell them back to their owners at current residential market prices if the banks do not re-negotiate the mortgages.  Banks, in turn, responded with a lawsuit against the City of Richmond, California, complaining that the proposal is a Constitutional violation of the Commerce Clause because the action benefits residents of Richmond, CA, at the expense of investors outside the State, reported the Wall Street Journal Online.

The Bank's legal action didn't work, however.  On September 12, 2013, the Federal Court in San Francisco rejected the banks' complaint, leaving banks to decide whether to negotiate with the city or appeal the decision of the Court.  (Reported by The Press-Enterprise at www.pe.com and San Francisco BayView at www.sfbayview.com).

This is very good news for homeowners who are angered that their mortgages are valued much higher than the value of their properties in the residential real estate market.  But what the City of Richmond's action shows is that this solution requires political activism, including action by savvy politicians at the local level.  Owners should work with their local representatives to take community action in the same manner as it happened in the City of Richmond, California.

Contracting with the Government–Division of Authorities

For foreign vendors and businesses, the difficulty of contracting with the U.S. Government, particularly with military personnel, transcend problems with language and culture.  Often times a foreign vendor may not be familiar with the nuances of the American way of contracting for the procurement of goods and services.  Ours is a very sophisticated and complex system, just as the commercial customs and practices foreign nations are at first beyond our comprehension.  It is through time and experience that we begin to understand each other’s customs and norms.  Hence, in due time, foreign vendors learn that not every green-suiter (terminology for military personnel) has the authority to enter into contracts on behalf of the U.S. Government. 

The division of contract authority and funding authority was established as a sophisticated system of checks and balances to prevent fraud and abuse of power.  Thus, in our system, contracting authority, command authority, resource management, and disbursing authority runs along separate pipes, if you will.  The following diagram provides a general framework for understanding the flow of funds and authority in military contracts: