Eminent domain powers have long been a rallying point for believers in the primacy of the Constitution and the importance of protecting private property from the rapacious hands of Big Government. A new issue has arisen that may stoke the ire of Tea Party folks and others concerned with the prospect of an ever growing role for politicians and their allies in our lives.

Various California communities are exploring -- with the help of Democratic investor cronies connected to Bill Clinton and others -- their eminent domain powers to seize mortgages owned by private investors. These mortgages would then be sold to a newly formed investment company who hope to buy these mortgages on the cheap and profit from them in the months and years to come.

Nick Timiraos of the Wall Street Journal reports :

A handful of local officials in California who say the housing bust is a public blight on their cities may invoke their eminent-domain powers to restructure mortgages as a way to help some borrowers who owe more than their homes are worth.

Investors holding the current mortgages predict the move will backfire by driving up borrowing costs and further depress property values. "I don't see how you could find it anything other than appalling," said Scott Simon, a managing director at Pacific Investment Management Co., or Pimco, a unit of Allianz SE.

Eminent domain allows a government to forcibly acquire property that is then reused in a way considered good for the public--new housing, roads, shopping centers and the like. Owners of the properties are entitled to compensation, which is usually determined by a court.

But instead of tearing down property, California's San Bernardino County and two of its largest cities, Ontario and Fontana, want to put eminent domain to a highly unorthodox use to keep people in their homes.

The municipalities, about 45 minutes east of Los Angeles, would acquire underwater mortgages from investors and cut the loan principal to match the current property value. Then, they would resell the reduced mortgages to new investors.

Those new investors would be the  venture capital firm, Mortgage Resolution Partners, that is planning to hire Evercore Partners to find investors for this gambit. Evercore was founded and is led by Roger Altman, who served in the Clinton administration and has been busy raising funds for Barack Obama's campaign.

As Timraos notes:

The seizure of home-mortgage liens, but not the underlying homes, hasn't ever been conducted through eminent domain, as far as the group's principals can tell. And while they believe they have a strong legal case, they expect loan owners to sue.

"California legal precedent and political posture favor the program and constitute an ideal proving ground," Mortgage Resolution Partners said in a presentation to investors reviewed by The Wall Street Journal.

The document said it would begin with a $5 billion effort in California that could grow to three million mortgages as part of a $500 billion multistate effort.

The new investors use the powers of Big Government to bully private holders of these mortgages into turning them over to the government at prices depressed by the current malaise in the real estate industry. These investors would then hope to ride out the weak, but nascent recovery, to sell these mortgages at higher prices in the future.

Who gets harmed? Well, for one, the old mortgage holders who get shook down by the government and are compelled to sell their investments at a reduced price via eminent domain proceedings. The concept that private property being a right enshrined in our nation's founding documents might be old-fashioned in the Age of Obama (who violated debt holder rights in the bankruptcy of General Motors and Chrysler), but still may resonate with most Americans.

We all would suffer in the end because future investors would be far less likely to make mortgage loans if they feel Big Brother could sweep down at times of market weakness, buy these loans on the cheap, and resell them to politically-connected cronies.