{"id":2846,"date":"2013-04-30T01:13:54","date_gmt":"2013-04-30T06:13:54","guid":{"rendered":"http:\/\/www.cnht.org\/news\/?p=2846"},"modified":"2017-12-14T11:01:56","modified_gmt":"2017-12-14T16:01:56","slug":"no-to-bailout-of-frm-victims","status":"publish","type":"post","link":"https:\/\/www.cnht.org\/news\/2013\/04\/30\/no-to-bailout-of-frm-victims\/","title":{"rendered":"No to Bailout of FRM Victims"},"content":{"rendered":"

SB 180 <\/a>is a bill that establishes a restitution fund for people who were defrauded by FRM. \u00a0The people who were defrauded, most of whom appear to live outside New Hampshire, are seeking compensation from the New Hampshire State Government for their losses.<\/p>\n

This compensation fund means that every New Hampshire family of four will be taxed $100 to pay for the compensation fund.<\/p>\n

Financial Resources Mortgage was a New Hampshire firm established by Scott Farah that brokered mortgages. \u00a0The business specialized in seeking out investors for borrowers who owned their own homes but who could not qualify for an ordinary bank loan. \u00a0Investors typically made loans up to 50% of the property’s value for a 10% interest rate. For matching lenders to borrowers, FRM collected a brokerage fee for the service. \u00a0In addition, FRM handled the management of loan repayment through a firm in Meredith, CL&M.<\/p>\n

What FRM was really doing was taking money from investors to pay the high interest rates guaranteed to other investors. \u00a0While the real estate market was booming, which it was until 2007, FRM could get away with that because business was expanding. \u00a0When the real estate market crashed, FRM could no longer attract investors in sufficient quantities to keep the game going, and in November, 2009, the company shut its doors.<\/p>\n

Investors believe that the New Hampshire banking commission and the state attorney general should have not only monitored their activity better, but should have shut them down in 2005 or 2006. \u00a0They are now insisting that because nobody shut FRM down, then the state government is responsible for the losses that the people suffered. \u00a0 In addition, they are also claiming that because state attorney general Ayotte forced the company into Chapter 7 bankruptcy after it closed its doors rather than going into state receivership, the investors will lose more money because of the differences in how the properties are handled.<\/p>\n

The investors claim that they were told by the banking department that there were few problems with FRM in their files when they called. \u00a0Since there’s about 150 investors in the group that would benefit from a compensation fund, questions have arisen about how many of them actually contacted the banking department. \u00a0An attorney from the banking department pointed out that only a small fraction of them could have called to ask about FRM, meaning that most of them didn’t contact the department to ask. \u00a0Because the investors generally didn’t know each other’s identity before FRM collapsed, it seems that most are trying to hitch on ride with the ones who did.<\/p>\n

But that’s pretty weak, so the investors are also claiming that the banking commission or the attorney general should have known what was going on at FRM and shut them down. \u00a0There were definitely some documented problems at FRM, but this argument is complicated by two factors: \u00a0(1) \u00a0the state government was dealing with an actor who was very intentionally hiding his activity; and (2) the state agencies who regulate a business have a policy of trying to get a business who appears to be in trouble to work their way out of it rather than shut them down. \u00a0In general, shutting down a business is a drastic measure and generally results in far more damage than trying to rehabilitate a business. \u00a0Statistically, this strategy works in most cases.<\/p>\n

But what the arguments that the state’s agencies should have provided information to investors and that those same agencies should have acted sooner presumes one very frightening doctrine: \u00a0that the state has a requirement to protect investors from making bad investments. \u00a0 If if they don’t, then the taxpayers can be called upon to repay the capital that the investors lost.<\/p>\n

It’s very telling in this situation that some of the investors checked with the Better Business Bureau as well. \u00a0Strangely enough, though, these same investors aren’t trying to extract money from the BBB.<\/p>\n

Almost every investor who has testified believes that even though they are investing money, they should not be risking the loss of their capital. \u00a0Some even refuse to let themselves be called investors. \u00a0That begs the question: \u00a0if they are not investors, then what are they, bankers? \u00a0Oh, wait, the federal government did bail out some bankers’ bad investments.<\/p>\n

So this is just another bailout, though it’s at the state level and it’s a first for New Hampshire. \u00a0And it begs the question: \u00a0If somebody in state government woulda\/coulda\/shoulda done something to prevent harm to any person, regardless of where they live, can New Hampshire taxpayers be forced to cough up compensation for their losses? \u00a0In most cases, the U.S. Supreme Court has said no.<\/p>\n

The vast majority of those New Hampshire taxpayers had nothing to do with these investors’ losses. \u00a0The two bad actors–Scott Farah and Donald Dodge of CL&M–were sentenced in 2011 to prison terms 20 years and 6 1\/2 years respectively. \u00a0The Federal Bankruptcy Court handling what remains of FRM is parceling out the proceeds, though investors are likely to see just pennies on the dollar. \u00a0(In this case, the law firm handling the bankruptcy will probably see more money than all of the investors combined, but that’s another story.)<\/p>\n

As aggrieved as the investors in FRM are, setting up a state-funded compensation fund is horrible public policy. \u00a0Yet that is what is about to happen. The State Senate has already passed the bill, and it’s now in the House Commerce Committee, where a couple of state reps are trying to ram it through.<\/p>\n

The next hearing on this bill is at 9:00 AM on April 30 in Room 206 of the Legislative Office Building. \u00a0It will be voted on May 1 by the Commerce Committee some time after 10:00 AM in Room 302 of the LOB.<\/strong><\/p>\n

Please let the Commerce Committee<\/a> know how you feel about this bill.<\/p>\n

“Butler, Ed” @ edofthenotch@aol.com
\n“Schlachman, Donna” @ Donna.Schlachman@leg.state.nh.us
\n“Gidge, Kenneth” @ kgidge@aol.com
\n“Hammond, Jill Shaffer” @ jshafham@gmail.com
\n“Mulholland, Catherine” @ cmulholland134@gmail.com
\n“Heden, Ruth” @ Ruth.Heden@leg.state.nh.us
\n“McNamara, Richard” @ Richard.McNamara@leg.state.nh.us
\n“Muns, Chris” @ Chris.Muns@leg.state.nh.us
\n“Scarlotto, Joe” @ Joseph.Scarlotto@leg.state.nh.us
\n“Williams, Kermit” @ Kermit.Williams@leg.state.nh.us
\n“Hunt, John” @ jbhunt@prodigy.net
\n“Flanders, Donald” @ dflanders@metrocast.net
\n“Belanger, Ronald” @ Ronald.Belanger@leg.state.nh.us
\n“Rice, Fred” @ Fred.Rice@leg.state.nh.us
\n“Tucker, Pam” @ Pam.Tucker@leg.state.nh.us
\n“Jones,Laura” @ laurajonesnh@gmail.com
\n“Murphy,Keith” @ rep.keithmurphy@gmail.com
\n“Sandblade, Emily” @ representative.emily.sandblade@gmail.com
\n“Chandler, Gene” @ Gene.Chandler@leg.state.nh.us
\n“Walz, Mary Beth” @ MB.Walz@leg.state.nh.us<\/p>\n","protected":false},"excerpt":{"rendered":"

SB 180 is a bill that establishes a restitution fund for people who were defrauded by FRM. \u00a0The people who were defrauded, most of whom appear to live outside New Hampshire, are seeking compensation from the New Hampshire State Government for their losses. This compensation fund means that every New Hampshire family of four will […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[11,50],"tags":[],"class_list":["post-2846","post","type-post","status-publish","format-standard","hentry","category-legislation","category-taxes"],"_links":{"self":[{"href":"https:\/\/www.cnht.org\/news\/wp-json\/wp\/v2\/posts\/2846","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.cnht.org\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.cnht.org\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.cnht.org\/news\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.cnht.org\/news\/wp-json\/wp\/v2\/comments?post=2846"}],"version-history":[{"count":7,"href":"https:\/\/www.cnht.org\/news\/wp-json\/wp\/v2\/posts\/2846\/revisions"}],"predecessor-version":[{"id":6103,"href":"https:\/\/www.cnht.org\/news\/wp-json\/wp\/v2\/posts\/2846\/revisions\/6103"}],"wp:attachment":[{"href":"https:\/\/www.cnht.org\/news\/wp-json\/wp\/v2\/media?parent=2846"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.cnht.org\/news\/wp-json\/wp\/v2\/categories?post=2846"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.cnht.org\/news\/wp-json\/wp\/v2\/tags?post=2846"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}