The Republican Who Tackled Foreclosures

President Obama isn’t the first politician to have to stare a massive foreclosure crisis in the face.

The last time foreclosures loomed so large in the economy and the national consciousness was during the Great Depression, when farmers and homeowners were losing their land in massive numbers.

Several states passed laws including moratoriums on foreclosure. Not because the banks couldn’t prove they owned the farms, or because they screwed up the paperwork. The moratoriums were implemented in recognition that the country was in an economic emergency and that having so many people lose their homes was bad for the country.

Minnesota passed such a law in 1933. After a judge allowed a couple to postpone foreclosure, the building and loan association that owned the mortgagee challenged the law. The firm appealed to the Supreme Court, contending that law was a violation of the Contracts Clause of the Constitution. But in its  landmark ruling in Home Building v. Blaisdell, the high court upheld the law. By a 5 to 4 vote the court ruled that the contracts clause wasn’t absolute and it didn’t outweigh the rights of the states to protect the vital interests of its citizens. In dissent, Associate Justice George Sutherland warned that the ruling would be just the beginning of further erosion of the contracts clause.

Chief Justice Charles Evans Hughes, an appointee of President Herbert Hoover, wrote the majority opinion. Hughes wasn’t some ivory-tower judge but a seasoned and fascinating Republican politician who had served as two-term governor of New York, with a record for establishing a public service commission, as well as pushing through labor law and insurance reform. He ran unsuccessfully for president against Woodrow Wilson before serving his first stint on the Supreme Court before running for president. After a stretch as secretary of state under President Calvin Coolidge, he was in and out of private life before President Hoover appointed him chief justice in 1930.

Though liberals gave him a hard time in his confirmation hearing, he often provided a swing vote in favor of the New Deal on a highly contentious court. But Hughes also repeatedly tangled with Roosevelt, voting against the constitutionality of the National Recovery Administration and opposing FDR’s court-packing scheme.

What do we get from this excursion into history? There’s some comfort in knowing the country has grappled with these tough times and issues before and survived. But it’s hard to encounter a figure like Hughes and not wish that some of his courage and unpredictability could rub off on our current crop of leaders, who seem so timid and tame by comparison, and who seem to have forgotten that protecting the vital interests of citizens isn’t just a matter of bailing out banks and tax cuts for the rich and hoping some of the booty will trickle down to the rest of us.

Around the Web: Will the Dodd Abide?

The fight for financial reform enters a new stage this week when Sen. Chris Dodd launches his latest version of his proposal. The New York Times highlights the senator’s weak nods in the direction of granting shareholders more power: giving them “advisory” votes on executive pay and the ability to nominate board members.

Dodd’s earlier proposal was considered stronger than the House reform bill, which was strongly supported by consumer advocates and opposed by bankers and the Obama administration. Dodd is a long-time ally of financial and insurance industries who have backed him over the years. But those close ties were undermining him politically after the financial crisis, so he was attempting to forge the appropriate image of a tough politician. Then Dodd dropped out of his tough reelection bid and he began to back off from some of his positions, like support for a strong and independent Consumer Financial Protection Agency. His effort to negotiate a bipartisan bill broke down and now some are reporting that Dodd has returned to some of the tough positions he had advocated. Here’s Calculated Risk’s breakdown of the proposal Dodd is about to unveil. Though it’s hard to imagine the push for financial reform going any slower, that’s what Republicans want, the Washington Post reports.

At the same time, the American Bankers Association meets in Washington this week, Business Week reports. They are ready to battle any attempt at greater consumer financial protections. They’ll defeat it outright if they can, and fight to water it down if they can’t kill it.