On a drizzly November morning, Steven Gluckstern speeds through the half-empty subdivisions that spread out for miles as you head east from San Francisco into California’s Central Valley. Taking the exit in downtown Merced, a small city that’s hit hard times, he passes a grizzled panhandler holding a sign that says, “Will work to get out of Hell.” The 61-year-old venture capitalist taps the steering wheel of his Volkswagen SUV and hums along to “Like A Rolling Stone,” getting himself psyched up to make his pitch.
He parks and bounds into Merced’s modest city hall to speak to a small gathering of city council members, realtors, and housing activists. (Read more…) “If we sit around and wait for the solution to come from Washington, DC, or Sacramento, it will not come,” Gluckstern tells them between deep dives into stats on underwater mortgages, negative home equity, and loan default rates. “It will not come! It hasn’t come in five years.”
Merced, whose foreclosure rate is twice the national average, is just the latest stop as Gluckstern crisscrosses California to sell struggling cities on a radical, untested way to fix the mortgage crisis. His scheme is almost as complicated as the derivatives and collateralized debt obligations that caused this mess to begin with. However, its underlying mechanism is simple: Cities should use the power of eminent domain to seize troubled mortgages from the bondholders that own them.
[VIA MoJo Blogs and Articles | Mother Jones]