Fighting Foreclosure revisits a 1933 Supreme Court decision that opened the door for state governments to provide relief to debtors during periods of recession or financial crisis. The work addresses a serious and contemporary question: Under what extraordinary circumstances can a government alter the terms of an existing and wholly private contract—a mortgage—to serve a broader public interest? The question introduces a range of legal issues that the Court confronted as the Depression unfolded in the 1930s: What constitutes an emergency? How are basic rights of creditors preserved? Is state intervention temporary? Is there a public interest to be served?
John Fliter and Derek Hoff offer a thorough treatment of the history and impact of Home Building and Loan Association v. Blaisdell, a case that was widely seen—at the time—as a landmark repudiation of the Contract Clause and an almost radical expansion of state power. The contemporary status of Blaisdell, rarely mentioned as a landmark today, is ironic on two counts. First, a later 1937 case, West Coast Hotel Co v. Parish, is typically identified as the turning point in judicial scrutiny of Depression-era state and federal legislation. Second, the policy options that Blaisdell permits—such as suspending foreclosures by extending the redemption period—are no longer palatable or even tempting for state governments. Fliter and Hoff offer some insights into both of these puzzles: how Blaisdell was largely overlooked after “the switch in time that saved nine” four years later and why elected officials did not choose Blaisdell-inspired remedies during the 2008–10 foreclosure crisis.
The authors offer a brief, clear account of the emergence of the Contract Clause as a critical piece of the Constitution. Debtor relief laws popular during the Confederation Period specifically motivated the framers to adopt vigorous language to protect private contracts from state intervention. Early Court decisions strengthened the Clause and, over a series of economic crises in the 19th century, the Court struck down a variety of attempts by states to intervene on behalf of debtors. Fliter and Hoff conclude that “every remedy” proposed in Minnesota in 1933 had “at one point been held unconstitutional by state or federal courts” (p. 36).
The Minnesota Mortgage Moratorium Act represented an important victory for the Farm Holiday Movement. Fliter and Hoff devote a chapter to the organization and principal actors in the movement, a widespread network of farmers who disrupted foreclosure sales, organized farm strikes, and pressured state officials to act to assist farmers and other struggling borrowers. The discussion of agrarian radicalism highlights one feature of the political environment of the 1930s that is clearly different from our contemporary experience: the real threat of political violence. The prospect of disruptive resistance—like the anarchist bombings, labor unrest, and farm strikes experienced in the first two decades of the 20th century—motivated state action during the Depression. The public emergency at the heart of the Blaisdell was not simply economic, but the fear that a wave of foreclosures could inspire mayhem or even revolution—in the words of one Blaisdell attorney—a “menacing danger of widespread rioting” (p. 127).
The central claim of the book is that Blaisdell—along with Nebbia, a 1933 decision that upheld New York State regulation of the dairy market—should both have the status of landmark cases—as “stepping stones” for the later cases that clearly ratified New Deal policies. This claim is not only rooted in the particular features of the case—that the state can impair fulfillment of contracts in an economic emergency—but also in the broader implications of the decision. Blaisdell advanced legal realism, the idea that judges and law should be influenced by changing economic, social, and political conditions. The majority opinion, adopting language proposed by Justice Benjamin Cardozo, endorsed this objective, proposing a new and “rational compromise between individual rights and public welfare” (p. 136). After Blaisdell, the Contract Clause was no longer the first line of defense for interests opposed to state intervention but largely relegated to a “Constitutional graveyard” (p. 169).
The final chapter of the book directly addresses the anemic, half-hearted state and federal responses to the 2008 mortgage crisis—responses that emphasized aid to lenders and macroeconomic stimulus, rather than aid to borrowers. While a few states considered mortgage moratoriums of the type that proliferated after Blaisdell, nothing like the Minnesota Mortgage Moratorium Act emerged after the 2008 crisis. In fact, Minnesota Republican Governor Tim Pawlenty vetoed, to the relief of the financial services community, a bill that would have provided some aid for subprime borrowers.
The case is paradoxical. Blaisdell was a landmark, watershed case in 1933, but the discretion that the decision gave states to meet a foreclosure crisis is largely unused today. Certainly, the circumstances of foreclosure do mean something different today—in the 1930s, mortgaged property was not just a home but a livelihood—a loan might be taken against a family farm or a boardinghouse: There was little in the form of a safety net for victims of foreclosure. Nevertheless the sheer scale of the crisis today and the financial and human toll of foreclosures in 2008–10 might have led to more state responses that protected debtors. Fliter and Hoff highlight the differences between advocates of relief then and now. Collective action in response to foreclosure came from a wide network of farmers and workers in 1930s Minnesota; ACORN was the core of the political agitation in 2008. The authors also appeal to broader ideological shifts that have elevated the ethic of personal responsibility over the idea of public interest. In some ways, the authors embrace this perspective—concluding that “many of today's victims created their own problems” (p. 187). This claim, like the broader ideological shift, echoes arguments from Sutherland's dissenting opinion in Blaisdell that financial crisis is frequent, predictable, and regular, and that appropriate solutions are to be found in “self denial and painful effort” of borrowers rather than state intervention and relief.
Overall, this is an interesting, timely piece of scholarship. The book (and the broader series, Landmark Law Cases and American Society) have a particular niche. If you are looking for formal-theoretic treatment of judicial decision-making or a statistical model of judicial choices, then you will be disappointed by this book. If you are in search of an original and fresh way to introduce politics and law in the Great Depression or to introduce students to broader tensions between individual rights and the public interest and historical controversies over the meaning of the Constitution, this book has a lot to offer.
