The Morality of Occupying Private Property

By Steve Horwitz On December 21, 2011 · 25 Comments · In Current Events, Libertarianism

So as the Occupy movement switches tactics to occupy foreclosed homes, I pose the following questions for my colleagues here at BHL and the commentariat:

1. Given that many of those homes are the property of the very same banks who were bailed out with their/our tax dollars, is there any reason to object to Occupiers simply reclaiming property that we could argue, with some strong moral force, actually belongs to “them/us” anyway?

2. And given the questionable legality of the foreclosure tactics banks have used, isn’t there a legitimate question of whether those homes really belong to the banks?

In answering, one might think about Rothbardian and Nozickean theories of just transfer, Hernando de Soto’s work, and the Ragnar character from Atlas Shrugged. The tensions between deontological and consequentialist approaches are very fascinating here too.

I posed this on Facebook recently and a long and interesting discussion ensued and I was curious what the BHL crowd would say.

Finally, I don’t have a clear answer to either question myself, but I don’t think it’s clear and obvious that these attempts to occupy foreclosed houses are wrong on libertarian grounds.

Anonymous

YES AND YES.

by way of this:

The following is an article by Murray Rothbard, the founder of Anarcho-Capitalism, published in the Libertarian Forum June 15, 1969, advocating the seizure of State and Corporate property by workers and students to form coops. Yes, you read that correctly.

CONFISCATION AND THE HOMESTEAD PRINCIPLE
BY MURRAY ROTHBARD
http://williamgillis.blogspot.com/2007/11/all-power-to-soviets-following-is.html

and this:
WHAT ARE THE SPECIFICS
BY KARL HESSS
http://littlealexinwonderland.wordpress.com/2010/03/01/karl-hess-on-the-specifics-of-libertarianism-1969/
Anonymous

Yes, morality is relative.

Next question?
Anonymous

& since no one is going to read those links: banks are wholly illegitimate creatures of the state. under state capitalism all property owned by the state and/or massive capitalist firms that profit from state-granted monopolies and other privileges are illegitimate.

now it gets more complicated when you want to know what to do about all that. who ought to have a claim to a foreclosed house probably depends on the specifics of the situation, but it shouldn’t be controversial that, esp. given what all went down, banks DO NOT rightfully ‘own’ any foreclosed properties.

http://www.facebook.com/people/Rick-DiMare/100000504645309 Rick DiMare

“banks DO NOT rightfully ‘own’ any foreclosed properties”
Maybe so, but they own the currency that was used to acquire them.

bill woolsey

If some banks were insolvent, then the homes collaterallizing the mortgate loans or mortgage backed securities held by those banks would ideally belong to the banks’ former creditors–in other words, the bank’s despositors.   Following Dowd and Zingale, I think insolvent banks need to be reorganized with a debt/deposit to equity swap.   Deposits and bonds are all written down alot, and all the creditors get stock in the reorganized bank.   All the bank’s assets then belong to the new stockholders, who were and remain creditors/depositors too.

In fact, many of the former creditors of the banks were paid in full, because the Federal Reserve lent the banks enought to pay them off.   TARP ended up being the same thing, but with the loans being preferred stock investments.   This was supposed to help the situation because of capital requirements.    The TARP investments is tier one capital and loans would be tier two at best, or just another type of debt.   Anyway, these loans and quasi-loans allowed banks to pay off their creditors.   Complicating matters, some banks were creditors of other banks. Or, more exactly, Goldman Sachs was a creditor of AIG.

Still, the remaining creditors of the banks, who weren’t paid off, have a claim on those repossesed homes.   If they are siezed by protestors (on some Rothbardian theory of homesteading unjustly acquired property,) then the banks would likely be insolvent again.   What should happen would be that the depositors and bondholders debts should be written down and they should be given equity claims to the remainder.   Any loss to them, I think, is theft.

There were some FDIC resolutions of commercial banks.   For example, Wachovia.    In that case, the old stockholders were wiped out, as was appropriate.   Ideally, the depositors would have taken the remaining loss (greatly reduced deposits and a stock claim to the remainder.)    But generally, a bank was paid to take over responsibility for all of the deposits.     Well’s Fargo, for example.    There is usually some FDIC backstop on losses from bad loans.    Anyway, FDIC would have had to pay them more if they didn’t get the assets, including colleral of foreclosed homes.   And it is likely that FDIC would be responsible.

Finally, the Federal government has taken over Freddy and Fanny and guaranteed the interest and principle on all the mortgage backed securities they issued.   The stockholders were wiped out, but all of the bondholders were covered–are being covered.   I think that there are various firms, sometimes banks, that are servicing all of those mortgages, so really, while some bank does the direct foreclosure, the result reduces the national debt.
Joshua Kaye

I don’t think the bank bailouts are/were proper. However, we did NOT nationalize the banks – the government is not the legal owner of the banks or their assets and liabilities. One might object that one shouldn’t hang a moral question on a legal fact. But government entanglement in the behavior and exposure of the big banks runs so deep that we might never see clearly on who is to blame, ‘we or they’.

That said, even if the government did own the banks:

1. The government does not equal taxpayers; taxpayers at large do not simply own whatever assets and liabilities the government has. We cannot spend the government’s money and our government’s creditors cannot collect the debt from us personally.

2. If the taxpayers did own whatever assets and liabilities the government had, we would do so in proportion to our ‘investment’. Those who paid more taxes would have greater right to any spoils of foreclosure.

3. Even if neither 1 nor 2 above were true, a small group of (presumed) taxpayers who identify as ‘Occupiers’ have no special claim to dispose of the assets of the entire class of taxpayers.

The Occupiers have no standing to address this subject.

There is an argument to be made for squatters’ rights in the case of abandoned property. But these foreclosed properties cannot be assumed to be abandoned, they may just be ‘lying fallow’ until the housing market stops collapsing. If the owners of foreclosed properties could lease them without a) being liable for the suitability of the property as a dwelling, b) risking accellerated degradation of the property in the hands of temporary residents, and c) facing barriers to eviction when conditions favor sale or increased rent charges, then you would expect them to lease them at any market price however low. But that’s not the case, in part because the law makes (a) and (c) problematic. If the owner of a foreclosed home faced no such regulatory constrictions and still refused to allow people to occupy an empty home at market rent, the argument in favor of ‘homesteading’ would be far stronger.

c.t. mummey

a) & c) might be problematic, but if the banking industry itself is problematic and houses are empty and poor ppl have nowhere to live then idk what your point is. if 98% of regulations are written by and for banks why should we care about the 2% that somehow aren’t?

Anonymous

Agreed, but 2 wrongs don’t make a right. If regulations are unfairly written, fix that. If property laws unfairly favor creditors, fix that. Lets not pretend that an after the fact public change to interpersonal contracts is addressing the fundamental problems. It’s causing new ones.

Anonymous

people have no way to ‘fix’ regulations except to ignore them (I managed to get 2 disqus logins somehow)

Anonymous

And that’s the problem, the table appears tilted, the cards are stacked and the game is rigged. Lets put our energy there instead. Not after the fact patches and work arounds. Allowing people to stay in a home even though a private contract says otherwise only deludes us into believing we’re solving the problem, when in fact it’s still there, misallocating resources.

Joshua Kaye

If you throw out the law, then you nominate yourself as judge of who deserves or does not deserve property. I wouldn’t want you making those decisions for anyone other than yourself; I especially wouldn’t want the Occupiers making those decisions for me. The banks may be enabled by our government to do stupid things with money I’d normally think of as mine, but nobody at a bank gets to decide whether I keep what’s mine.

If you want to help poor people find a place to live – offer them a place to live. One that you can legitimately offer, not one that you confiscate from someone else.

http://profiles.google.com/entelechy77 Kurt Horner

The words “legitimately” and “confiscate” in your last sentence presuppose that banks rightfully own those homes. They certainly legally own them, but what is right and what is legal are not always the same.

As for deciding what property is legitimate or not — if a public protest movement with broad support doesn’t have that capacity, no one does. Certainly, I can’t see why Occupier’s interpretation of justice is necessarily inferior to that of the state.

http://www.facebook.com/people/Rick-DiMare/100000504645309 Rick DiMare

“if a public protest movement with broad support doesn’t have that capacity, no one does.”
you’re on probation, please go to the back of class for awhile!
http://profiles.google.com/entelechy77 Kurt Horner

I assume by this comment that you think that the legitimacy of any particular property claim is “obvious.” Joshua at least has the good sense to recognize that there be some process for determining the legitimacy of any such claim.
http://www.facebook.com/people/Rick-DiMare/100000504645309 Rick DiMare

I didn’t say it was obvious. In fact, it most certainly is not. But we DO have a choice in currencies, and I don’t believe in legitimacy of mob rule, however obscure the choice is.

You may not be aware that you’re complaining about the effects of a certain currency, but the currency you’re complaining about, the one that causes the injustice you’re alluding to, is owned and issued by a private corporation, under their rules, with minimal ties to Congress.

But there are two other currencies that are far more capable of effecting real legal ownership, both of one’s labor/wages, and to a lesser extent, ownership of one’s real estate: (1) Treasury-Direct debt-free current coin, and (2) Treasury-Direct non-coin currencies, which are debt, but not debt owed to a private corporation and not debt which obligates the Treasury Department to pay interest to the Federal Reserve corporation.
Joshua Kaye

Even if I conclude that the banks come by their assets improperly – which in some cases I do conclude – it is only by proving those improprieties in a court of law that we should have the power to dispossess someone from their legal title.

Unfortunately, there is nothing generally deemed illegal or unconstitutional about the government transfering money from taxpayers to bank shareholders (or Solyndra or GM or big Pharma). Both sides of the political aisle have labored hard over the past 200 years to make sure the government is empowered to do just that, whenever it is politically feasible.

I think this kind of activity SHOULD be unconstitutional, as do quite a few libertarians and classic liberals, whether of the bleeding heart variety or not.

But, under no circumstances do I think a small non-representative, unelected mob should be able to substitute its own agenda for the rule of law with respect to other people’s person or property. (A point I made earlier was that even if the property isn’t morally the bank’s, it certainly isn’t more morally OWS’s).
http://profiles.google.com/entelechy77 Kurt Horner

Using a court process to determine the legitimacy of a property claim, presupposes that said process is just and fair. Since that “fact” is under dispute, then we must fall back to whatever process has the consent of the people. If a protest movement is large enough, courts don’t matter, and rightly so. See also: Declaration of Independence, Central Point of.
Joshua Kaye

We don’t live by the logic of revolution, thank god. See also: Constitution of the United States, Central Point of.
http://profiles.google.com/entelechy77 Kurt Horner

From where would our constitutional government derive authority, except from the consent of the governed? The logic of revolution undergirds the entire concept of representative government. If consent is withdrawn, it doesn’t matter what the “law” is.

I do think it’s interesting how this thread illustrates the tension between the radical conceptual language of libertarianism and the conservative rhetoric it sometimes employs.
Joshua Kaye

It seems to me you are bent on conflating the will of the ‘occupiers’ with the will of the people. I don’t know how you justify that.

Anonymous

Crossing the line between philosophy into real political examples is always going to be messy. Your philosophy can guide you, but we all know that compromises are made from there, and it appears that people often use philosophy as cover to advocate what they want, irregardless of philosophy. To put it another way, while we believe we are conscious, when acting, our consciousness actually delays our choices by a small but finite amount of time, so that we feel like we’re being rational and subjective though in reality we’re being guided by our a priori’s. While this isn’t perfectly true, as we leave the ivory tower and enter into the messy world of real choices, it becomes more true.

So lets just admit it. Though’s who support people staying in their home, probably also support the OWS groups that really brought this issue into the light. Those who oppose it, likely opposed what this group stood for. Am I being to cynical?

But in the spirit of the question, I believe that illegal occupants should be removed from homes, for the simple reason that rule-of-law is so critically important to a civilized society. When this type of behavior dominates, complex, single-event, & anonymous interactions can occur, benefiting society. When rule-of-law suffers, all of society suffers with it. Bailing out banks was a hammer blow to this
foundation and should not occur, and extending this to additional people should not occur either. Let’s not pretend that forcing these costs onto banks can somehow make up for our prior sins of bailing them out. That’s an very important but separate problem, and lets not pretend that forcing some unexpected costs onto the banks now can makeup for this. If “we” wish to bail these homeowners out, there’s a right way to do it which does not violate rule-of-law; by publicly purchasing these contracts from banks (Bill Woolsey elaborates on problems with this above). Sacrificing rule-of-law is the wrong way.

Anonymous

why not enforce the rule of law in a thousand different ways and let people make use of abandoned houses on the meantime?

Anonymous

“enforc(ing) the rule of law in a thousand different ways” is by definition impossible. With rule-of-law, the rules are known ahead of times and the players agree to them. If the rules are unfair, they’re changed going forward, but not retroactively. Modifying rules retroactively is not fair to the prior participants and causes real systemic uncertainty going forward: moral haphazard. Paradoxically, this will harm everyone including those the original action was intended to help though, of course, this is impossible to quantify or prove. But we see it’s historical evidence in the fall of every great civilizations.

In line with what you’re proposing though, I saw a 60 minutes the other night which argued that banks would be better off if they DIDN’T foreclose on homes, if they simply wrote down the value of the home. I’m very sympathetic to this however, if it’s true, I wonder why they aren’t in fact doing something which is in their own best interest? Seems odd to me, and I suspect there is something missing to the puzzle.

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http://profiles.google.com/entelechy77 Kurt Horner

This post does a really good job of answering the question “How do BHLs differ from typical right-libertarians?”

The usual conservatarian argument would be that Occupy Our Homes constitutes “stealing” from the banks. In many cases, they wouldn’t even acknowledge the shady way in which the banks came to have legal ownership — or at least they would consider it irrelevant.

But property is only defensible to the extent that it arises justly. They are so many state interventions, from construction restrictions (zoning, licensing, etc.), to GSE subsidization, to how banking is regulated (and concentrated), that it’s hard to believe that the current housing market even approximates a free market. Certainly the ubiquitous 30-year mortgage is of rather suspicious duration, given how often people usually move during their lives.

A rebellion against those squeezed by this system is entirely appropriate. Opposing this sort of action means that, in practice, you support those who benefit from the current system. I fail to see how free markets are promoted by carrying the water of corrupt bankers enriched by a rigged game.