BlackRock and Pimco taking action against California city's 'eminent domain' ploy

Several large bond investors including BlackRock Inc. and Pacific Investment Management Co. (Pimco) filed a complaint to the federal court in San Francisco yesterday, seeking to pre-empt Richmond, Calif.’s plan to seize a select group of underwater mortgages via eminent domain if lenders don’t agree to revalue the debts, Bloomberg reports.

“Mortgage Resolution Partners is threatening to seriously harm average Americans, including public pension members, other retirees and individual savers through a brazen scheme to abuse government powers for its own profit,” a lawyer for the firms said in an e-mailed statement on behalf of investors.

“I continue to stand by this program and the benefits to our residents,” Richmond Mayor Gayle McLaughlin told Bloomberg. “We feel comfortable with the legality of this.”

Source: Bloomberg