Monday, May 4, 2009

The 5th Amendment: Optional?

It would reduce the whole instrument to a single phrase, that of instituting a Congress with power to do whatever would be for the good of the United States; and, as they would be the sole judges of the good or evil, it would be also a power to do whatever evil they please.
-Thomas Jefferson

We believe that the statement above, penned more than 200 years ago by Thomas Jefferson, could serve as an all encompassing "Statement of Purpose" for everything contained within the Constitution. Clearly, the founding fathers understood that legislators and executive branch figures, prone to the numerous character deficiencies inherent to the human race, required a comprehensive set of parameters governing what they may or may not do. That set of parameters was created, and became known as the Constitution. Subsequent to the adoption of the Consitution, a series of Amendements known collectively as the "Bill of Rights" were incorporated. We would like to discuss the 5th such amendment today, as we feel that is has been sufficiently trampeled upon by both the Bush and Obama Administrations, as well as Congress.

To kick things off, we have provided the full text of the fifth amendment below, and have taken the liberty of bolding the portion in question:
"No person shall be held to answer for a capital, or otherwise infamous crime, unless on presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation"

In legal circles, the bolded portion of the text is referred to as the "Takings Clause" of the fifth amendment. This Clause is most regularly cited in cases involving eminent domain, a power exercised most often by local governments. Most of us probably know of someone who has recevied a small check from the Government in exchange for title to a small strip of his or her front lawn that is necessary to widen a road-this example being the most common manifestation of eminent domain power. Unfortunately, governments do often times attempt to "push the envelope" and test the true power of eminent domain. Instances such as this, and the subsequent court outcome, form the basis for the modern day legal precedent surrounding eminent domain.

In Hawaii Housing Authority v. Midkiff (467 U.S. 229), a Hawaiian State Law was passed for the purpose of ending the land oligopoloy that existed on that island for so many years(a small number of people owned virtually all of the land in Hawaii). The law sought to achieve this goal by establishing a process whereby the renter majority of the island could petition for the forcible purchase of his/her particular lot from the actual land owner. The owner would be compensated at "fair market value" for his land, the exact amount of which was a Government determination that was often dislocated from the land owner's perception of reality. This law caused the aggrieved land owners to sue, arguing that this action amounted to a Government taking of private property for private use-not the public use demanded by the Consitution. The Supreme Court disagreed, and in doing so distinguished the public use requirement with the language that "Government does not itself have to use property to legitimate the taking; it is only the taking's purpose, and not its mechanics, that must pass scrutiny under[p231] the Public Use Clause."

Having established that the Government may in fact take the property of one private party and transfer it to another private party, provided of course the purpose will serve a public good/use, we will move on to Berman v Parker (348 U.S. 26). This case was a challenge to the constitutionality of the District of Columbia Redevelopment Act of 1945. The purpose of this act was to eliminate "blighted"(a euphemism for poverty stricken, run-down parts of a town that the rich folk are embarassed to let visitors see) portions of the city by forcing current land owners to sell their property to developers, for the express purpose of tearing everything down and building more "desirable" neighborhood fixtures. This Act was challenged on the grounds that there was no legitimate public benefit derived from this property transfer, and thus was not a public use. The Court disagreed in the majority opinion, proclaiming that the Act served a public purpose to:
"prevent slum and substandard housing conditions -- even though such property may later be sold or leased to other private interests subject to conditions designed to accomplish these purposes."

This language has allowed cities and towns across the country to move into impoverished areas, displace the current residents, compensate land owners "fair market value", and turn the land over to developers. This sort of behavior was permitted to an even greater extent by the landmark 2005 case Kelo v City of New London (545 U.S. 469). Essentially, New London's city planners formed a group huddle, and emerged with a grand new vision for the City that would be implemented via a development commission. This commission set about acquiring tracts of adjoining land, at first from every willing seller, so that the land could be given to the pharmaceutical conglomerate Pfizer to build a new "campus". Eventually, some of the owners of the targeted parcels banded together and refused to sell. The commission quickly classified their property as "blighted" and initiated condemnation proceedings. The livid owners sued the City, and the case made it to the Supreme Court. The Court upheld the City's assertions, saying that:
"The city’s determination that the area at issue was sufficiently distressed to justify a program of economic rejuvenation is entitled to deference. The city has carefully formulated a development plan that it believes will provide appreciable benefits to the community, including, but not limited to, new jobs and increased tax revenue."

Kelo v New London was a 5-4 split decision by the Court, and remains extremely controversial because it essentially authorizes a Government taking through the claim that the transfer of property ownershipwill increase tax revenue to a municipality. We can safely say that the current interpretation of the takings clause has been pushed to the liberal boundary, if not beyond, based upon the current ideological make-up of the Court. That being said, we believe that several of the Government's financial rescue measures are clear violations of the 5th Amendment's Takings Clause.

Specifically, we refer to the losses forced upon Chrysler's creditors and the pending legislation that will allow for mortgage modification. Regardless of where one stands concerning the dispersion of blame for the financial crisis, it is undeniable that the Government is taking money from one private party, for the benefit of another. Its actions are not justified by any study proving that, to be specific, there will be a concrete taxpayer benefit from a Chrysler restructuring as opposed to a liquidation. There is also no evidence that mortgage modifications will lead to fewer foreclosures, in fact, there are studies that indicate the opposite effect. The Government's actions, in these two respects, are transfers of wealth from one private party to another, where the taxpayer is the damaged party. Could the Government prove in court that saving Chrysler serves any truly public benefit? Certainly, the UAW stands to benefit, but they are only one segment of the population, not representative of the public as a whole. Does the taxpayer benefit by the taking of value from holders of mortgage backed securities and the transfer of that value to homeowners? We would say no on the basis that a large portion of the "public" are actually indirect investors in these securities through pension and mutual funds. Additionally, the integrity of the MBS market is vital to the functioning of housing finance in general, which, as evidenced by various Congressional actions over the past twenty years, is apparently a source of pure public "good" Our conclusion is that neither of these actions can be justified as being a legitimate beneficial public use, at least not outside of the political arena, where fact and reason often take a back seat to the art of vote buying.
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