Now, let’s say Bank X, as you suggest, engaged in some fraudulent activity — it could only lend the money due to the fractional reserve system, or the government has granted it special privileges, or whatever. You’re saying that if this is the case, Eric doesn’t have to fulfill his side of the bargain because the bank did something “fraudulent,” and that he is entitled to cease fulfilling his obligations and to get a free house.

But how is that? How does Eric have more of a right to the house than anyone else if he fails to fulfill his obligations? As Bob Kaercher stated, didn’t he benefit from the fraudulent activity? If anything, if Bank X was determined to be involved in fraudulent activity, the contract should be null and void, Bank X should give back the money that Eric payed each month, and the asset (the house) should be returned to the former owner, Joe… OR, it should be sold by the courts or some other third party and all proceeds should be used to pay back any defrauded parties.

A borrows money from B. A pays C for house. A must now repay B. Until A pays B back in full the house is still the rightful property of B. However, if B was engaged in fraudulent activity, B did not rightfully own the property, so B obviously could not transfer the property to the new owner, A.

Now, in your follow-up you seem to be qualifying your initial post, that those situations are a bit more complicated from a libertarian property rights point of view than you originally implied. And if that’s what you’re saying, then I agree. And that, it seems to me, should NOT lead libertarians to support the ACORN project since there’s absolutely no indication whatsoever that THEY have any intention of determining who the just and rightful owner is under libertarian property theory, especially considering that they have typically received between $1-$2 million in tax-funded grants on an annual basis. It looks like that they have decided that the defaulting mortgagees should simply be made every accommodation to stay in the houses and that’s that. I don’t see any reference to ACORN wanting to determine who the legitimate, just owner under is in anything that they’re saying. If you can show me otherwise, then I might tend to agree with you that the ACORN project is worthy of libertarian support. But I’m not holding my breath.

“If you want to point to any one particular mortgagee that unjustly benefits from state subsidies/privilege MORE SO than the bank which holds their mortgage, I would be glad to take a look at the case.”

Brad, each and every one of those borrowers VOLUNTARILY signed a promissory note that explicitly stated that in so doing they were agreeing to repay $x plus x% interest in x period of time. They were fully aware that not doing so would eventually result in foreclosure.

You can point out all you want that the business with whom they entered the contractual agreement is a massively state-subsidized enterprise–no disagreement from me there–but nobody held a gun to their head to coerced them into taking a loan they couldn’t afford to repay. No doubt a lot of those lenders had no business making the loans they made to people who couldn’t afford them, but both sides know full well that it takes two to tango.

In freely and voluntarily accepting a loan from the privileged, subsidized banking cartel, the borrowers themselves shared in the benefits of the subsidy since it privileged them the use of a property they may not otherwise have had (especially considering expanded CRA mandates), however temporary it may have been. So if you’re going to apply libertarian property theory consistently, I don’t see how these borrowers are any more the legitimate owners of those houses than are the bankers.

http://bradspangler.com/blog/archives/1212

If the banks are “Massively state-subsidized enterprises”–and I’m aware that they are–then
doesn’t it follow that their customers, to whom they made mortgage loans with which to buy property,
are themselves beneficiaries of those same state subsidies? I don’t understand how they’re any more
entitled to the property than the bankers are when applying libertarian property theory.

Followup here:

http://bradspangler.com/blog/archives/1212

Libertarians believe in private property rights. A foreclosure is the rightful reclaiming of property by the bank, because the borrower didn’t pay his debts to the lender, or uphold his obligations to the lender (that he accepted by signing his name on the dotted line, by the way). If you cannot pay the mortgage, or you otherwise fail to uphold your end of the mortgage contract, the bank has every right to reclaim its property. To forbid this from happening is so far from libertarian it’s not even funny, because you can’t forfeit your obligations to the lender and just assume ownership of the asset without fully paying for it.

I’m a little confused as to how or why you’re not equally applying libertarian property theory to the borrowers and ACORN.