Kelo v. City of New London, 545 U.S. 469 (2005),
What does redistributive mean. Well, remember that it was the liberal Left-Wing Justices of the U.S. Supreme Court that brought us this little jewel, holding that the government could take your real property, like your home, not for public use like a road or school, but to give to another private individual, such as a political contributor or other party hack or interest group.
Kelo v. City of New London, 545 U.S. 469 (2005), was a case decided by the Supreme Court of the United States involving the use of eminent domain to transfer land from one private owner to another to further economic development. The case arose from the condemnation by New London, Connecticut, of privately owned real property so that it could be used as part of a comprehensive redevelopment plan. The Court held in a 5-4 decision that the general benefits a community enjoyed from economic growth qualified such redevelopment plans as a permissible "public use" under the Takings Clause of the Fifth Amendment. Justice John Paul Stevens wrote the majority opinion; he was joined by Justices Anthony Kennedy, David Souter, Ruth Bader Ginsburg and Stephen Breyer
The decision was widely criticized by American politicians and the general public. Many members of the general public viewed the outcome as a gross violation of property rights and as a misinterpretation of the Fifth Amendment, the consequence of which would be to benefit large corporations at the expense of individual homeowners and local communities. Some in the legal profession construe the public's outrage as being directed not at the interpretation of legal principles involved in the case, but at the broad moral principles of the general outcome.
http://en.wikipedia.org/wiki/Kelo_v._City_of_New_London
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The View From Israel
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So far Israeli banks seem to be weathering the crisis fairly well.
Only one bank had any sizable holdings in [mortgage-backed securities] and subprime and so forth. And all the others didn't. Some of them for good reasons. And others because they weren't sufficiently integrated into the global market. They weren't very exposed abroad; they had pretty good diversification of their holdings in foreign banks. But the real reason was that our mortgages are very conservative instruments. At this time it happened to be a benefit. Most of the time Israelis complain like heck that they have to put down large down payments. Now that we're in this crisis, that turned out to be a very good thing.
Were you surprised to see Alan Greenspan acknowledge that some derivatives like credit-default swaps
should have been better regulated?
I agree with that. [But] I'm concerned in this crisis that in a lot of things people will go too far. There are securitizations that have been very successful. The securitization of credit-card receivables has been working very well indeed. I don't think there's necessarily a problem with the securitization of mortgages. This European covered-bond system deals with some of the problems in securitization. In the securitizations in the United States, the risk is transferred to the buyer. In the covered-bond system, the risk stays with the seller, who is usually better able to deal with it.
You think securitizers
should keep a portion of what they're selling?
Somebody has to have the incentive to understand the risk right. The natural place seems to be the originator.
In recent weeks, currency markets have seen a flight to the dollar and yen. Should the IMF be propping up battered emerging-market currencies?
We've just come off five years of the most rapid growth in a very long time. It's one of the benefits of globalization. Now we're seeing some of the negative sides. The fund should have more money and should help countries deal with the negative consequences of what's going on now. I'm very glad it's back in action.
Pakistan's president Asif Ali Zardari was complaining this week about IMF loan conditions. What lessons did you learn about excessive conditionality from your time at the IMF?
There were cases in the 1990s when the fund had too much conditionality on things that weren't essential. There was a period in the early parts of the program when the fund wanted fiscal contraction when the fiscal contraction probably wasn't necessary. So that was the lesson I learned. But you cannot have a program where you say: fine, we'll give them the money, and they're responsible people. Some of the countries do get into crises because they're pursuing the wrong policies. You've got to correct that.
Is this the end of the theory of "decoupling
"
?
I think it was very unlikely that decoupling was [actually] happening. The decoupling view is based on the fact, by and large, if you look at the data on trade within Asia, intra-Asian trade has risen a great deal. And trade with the rest of the world is down. So there was a view that they're less dependent on the outside world. But then when you took into account what the trade is about, it was in many cases goods being produced for export to China to be put into goods which would then be exported to the United States. The other aspect is the financial connections are so much stronger than they used to be. It's implausible that a financial crisis of this magnitude wouldn't at some point have an impact.
© 2008
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