After the Bailout, Government-Owned Churches?

If any bailout legislation passes, the government will likely hold mortgages purchased from banks and attempt to sell them as soon as their value climbs high enough.

So what happens if the government buys out a bank on the verge of bankruptcy and obtains church mortgages? Would the government be entangled with religion? Would such an arrangement amount to a violation of the First Amendment’s bar against establishing religion?

The problem would be in the gap between when the government gets the mortgage and when it is sold, said University of Toledo law professor emeritus Howard Friedman, who raised the question in a blog post last week.

“Having a government-owned church is probably in theory an Establishment Clause problem,” Friedman said. “It gets a little more dicey if the church defaulted on the mortgage while the government was holding it — do you give them special consideration? If you don’t want to foreclose on them, do you foreclose on one church or not foreclose on another?”

Pre-foreclosure agonies aside, once the government foreclosed, there would not be much of an issue, said Pepperdine University professor of law Mark Scarberry. The Secretary of the Treasury would likely make an effort not to foreclose on churches, he said. But if it did foreclose, it would sell the property to a private owner or evict the defaulting church.

In any case, the government would not end up with long-term ownership of a functioning church. In a worst-case scenario, the congregation would have to move.

“That’s already a possibility whenever a church gets a mortgage,” Scarberry said. “People have always thought [that] as a matter of public relations it’s very difficult for a bank to foreclose on a church.”

But it does happen. The Deal magazine reported in August that a surprising number of churches are behind in mortgage payments, leading to the possibility of foreclosure.

Church-state scholars agree, though, that the legislation should not create a problem for churches.

“The government is not funding the construction of churches or land purchases, it’s looking at a market for real estate debt,” said Robert Tuttle, professor of law at George Washington University. “Whether it’s accepting payments, foreclosing, or negotiating, there’s no constitutional problem if it’s treating [all properties] the same.”

Depending on what form the bailout legislation finally takes, there’s a slight chance there would be similar Establishment Clause problems with student loans taken to attend religious colleges, Friedman said, but he doesn’t anticipate a problem.

“This is all awfully theoretical,” Friedman said. “Other than people praying for [the bailout] working, I don’t see much of any connection there with most of these mortgage loans.”