Dem maneuver in Legislature could slam housing market

April 20, 2012

By Katy Grimes

Democratic Leaders in the Legislature have figured out a clever way to bypass the legislative committee process, in order to ensure the results they want. This latest legislative trickery and rule manipulation created quite a stir at the state Capitol Thursday.

Earlier in the week, without warning, the Assembly Banking and Finance Committee, chaired by Assemblyman Mike Eng, D-Monterey Park, dropped three bills off the schedule. But these weren’t just any bills, they were the bills which make up the mortgage reform “Homeowner Bill of Rights” package, sponsored by Democratic Attorney General Kamala Harris.

Ostensibly, this bill package would reform California’s mortgage and real estate crisis.

However, after the Harris bill package dropped off the Assembly committee schedule, a related bill, AB 278 by Assemblyman Jerry Hill, D-San Mateo, popped up on the Senate floor Thursday, and was shoved through to passage, with only support from Democrats.

AB 278 is just a shill-bill dealing with unlicensed real estate agents. But it is being used fto trigger the necessary procedures required to create a Democratic-controlled conference committee to manage the outcome of the Attorney General’s bills.

Supporters of the conference committee option said that, because the Harris bill package was complex, the conference committee would provide lawmakers the opportunity to deal with the major policy changes.

But others are outraged and say that creating the legislative conference committee will allow the bill package to bypass the entire committee policy and finance process, as well as avoid scrutiny by the public.

Homeowners Bill of Rights

Harris is pushing lawmakers to pass the Homeowners Bill of Rights, patterned after President Barack Obama’s legislation of the same name. The legislation is supposed to protect homeowners facing foreclosure.

But bankers have objections.

Small banks and local credit unions did not cause the mortgage crisis — investment bankers did.

But that’s not stopping lawmakers from punishing all bankers, regardless of the ramifications.

A $25 billion national settlement agreement reached in February, struck among the Department of Justice, the Department of Housing and Urban Development, 49 state attorneys general and the country’s five largest mortgage loan servicers: Bank of America Corp., Citigroup Inc., JP Morgan Chase & Co., Wells Fargo & Company and Ally Financial Inc., according to Forbes.

The five biggest U.S. banks agreed to the deal, which would impose a ban on all banks from filing a foreclosure notice when a homeowner is in the middle of the loan modification process.

The national ban expires in three years, but Harris is pushing for California to keep the ban in place permanently.

Critics say that the bill package in the California Legislature may actually pave the way for more lawsuits, and slow any recent improvements in the already slow-to-recover housing market. With economists predicting another mortgage meltdown, the American economy could be in for an economic hurricane.

Opponents also say that the legislation would create expensive, new lending obligations, which would likely result in a much higher cost to borrow money, which could be an additional blow to the housing market.

However, instead of allowing Harris to defend her bills in the committee hearing, legislators bowed to pressure from above, and pulled the bills from the committee calendar.

Talk around the Capitol after the hearing episode was that the order to pull the bills came from the highest office in the state, and referred to a feud between Gov. Jerry Brown and Harris. But this has not been confirmed.

In the right corner…

Thursday’s maneuver did not go down without a fight. Sen. Sam Blakeslee, R-San Luis Obispo, urged Senators to oppose AB 278, and reminded colleagues that the Legislature had recently passed dozens of spot bills, weakening the legislative process. “This is not the historical norm,” Blakeslee said.

Spot bills are empty bills which do not yet contain language, but will be used at the end of the legislative session to pass laws legislators couldn’t get passed through the traditional committee process.

Blakeslee said that in the past, only the state’s 2010 water bond, the 2004 workers compensation reform, and electricity deregulation had been dealt with in conference committee, and only after already being vetted using the standard committee process.

A conference committee is traditionally used to work out the differences which committees could not.

“We are speaking about a bill on real estate,” Blakeslee said.

Blakeslee explained that by avoiding the usual and legal committee process, the public would never hear the policy and financial debate surrounding the bills. He expressed his irritation that the Senate Banking and Finance committee, of which Blakeslee is the vice chairman, would never have a chance to weigh in on the bills.

“There’s not precedence in the use of the conference committee,” Blakeslee said. “I am standing in defense of the majority party. It raises serious questions about to what lengths this body will go to jam through legislation without the types of processes we have historically used.”

“These are regular policy issues. “We should not pervert our process to produce the desired outcome,” Blakeslee said.

“And to the minority party, do not surrender your constitutional power,” Blakeslee added.

Leadership weighs in

“To have hearings on policy is right,” said Senate Minority Leader Bob Huff, R-Diamond Bar. “To obfuscate is not.” Huff pointed out that the Senate Joint Rules require that all bills, other than budget bills, must be heard by policy committees of each house.

“We form a conference committee to find a meeting of the minds,” Huff said. “Without normal transparency, major policy issues here will be decided on in some smoke-filled back room. Trampling on the rules is a slippery slope.”

“Read your rules,” Senate President Pro Tem Darrell Steinberg, D-Sacramento replied. “Read your Senate rules. Because we pride ourselves on following the rules, and in this instance we have done so.”

“We’re not trying to hide anything,” said Sen. Juan Vargas, D-San Diego. “Important things can be done in the conference committee.”

Capitol staffers explained that the conference committee members, appointed by Assembly Speaker John A. Pérez, and Senate President Pro Tem Darrell Steinberg, will consist of six members in total, made up of one Republican and two Democrats from each house. Committee appointments will be announced next week.