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Thursday, November 21, 2013

Specter Of Wall Street Waters Down Oakland's Anti-Foreclosure Resolution

OAKLAND CITY COUNCIL | FORECLOSURES | What began as two competing resolution designed to show support for Richmond’s audacious plan to help underwater mortgage holders reduce principal and potentially by use of eminent domain, took pains Tuesday night to avoid worrying Wall Street investors.

The City Council unanimously passed a resolution by Councilmember Rebecca Kaplan admittedly tweaked to avoid causing investors any sleepless nights worrying about Oakland one day joining Richmond and its controversial principal-reduction plans. Councilmember Desley Brooks had also offered another resolution in support of Richmond, but some council members cautioned it might send Wall Street the wrong message with its repeated use of the phrase “eminent domain.” Both resolutions were deemed ceremonial by its authors.

Since Richmond had received threats of reprisals against its bond rating by financial institution even before it set a path forward earlier this year, Kaplan struck a passage in her resolution asking for an early legal analysis by the city attorney’s office. Notably, the resolution passed Tuesday night avoids legislative nomenclature normally used in resolutions showing support for cause or entity, such as “strong support” and “we stand in support of.”

Kaplan says she was briefed by an outside entity that bond markets could “misinterpret” either phrase “as a term of us endorsing legislation.” “They might think we are going the path of copying Richmond’s strategy particularly,” said Kaplan. “So, in order to avoid that risk to our city, I have made the changes to make it clear this resolution is supportive of Richmond’s goal, but does not use the typical words that might imply we're endorsing a specific strategy.”

The council, including Brooks, ultimately approved Kaplan’s nuanced resolution with Council President Pat Kernighan saying, the presence of three sections in Brooks’ plan using the term eminent domain, in addition, to the title, made it “pretty clear” the council would be supporting its potential use in Richmond.

Brooks, though, said, “This has always been about principal reduction. It has never been about eminent domain and when we talk about eminent domain, we cloud the conversation.” Later, Brooks added, the council too often compromises on issues to the point they are “watered down” and “meaningless.”

“I think the bigger issue for me is that a council provide leadership and not be afraid to speak on behalf of its residents and that if we allow banking institutions to silence us because it might look like we’re going down a path.” She maintains eminent domain is only a last resort and not by offering Richmond its strongest support, it may actually hurt their ability to gain leverage from other cities interested in their plan. “I believe Richmond deserves some support," said Brooks, "but it’s not lukewarm support that we should be providing them.”

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