Monday, September 22, 2008

A Church-State Aside On the Proposed Financial Bailout

The massive bailout of distressed financial institutions proposed over the weekend by the Treasury Department (New York Times) would give the government sweeping powers to "purchase ... mortgage related assets from any financial institution having its headquarters in the United States." Mortgage-related assets are defined in the draft bill (full text) as including "residential or commercial mortgages". An August 8 article in The Deal points out that a surprising number of churches are delinquent in their mortgage payments and face foreclosure, though lenders attempt to avoid foreclosing. In many cases the mortgage holders are not financial institutions, but instead holders of church bonds. But where the mortgage lender is a bank, is the draft bailout legislation broad enough to permit purchase of shaky church mortgages by the Treasury? If so, are there any church-state problems with the federal government essentially owning an interest in church buildings?