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My first guess was that transferring ownership would moot previous court decisions holding the display unconstitutional under the California Constitution's No Perference clause. The idea, roughly, is that California law can't control what happens on federal land. But there is still the little problem of the Establishment Clause of the U.S. Constitution.
Some people, like Justice Thomas, argue that the Establishment Clause does not apply to the states. Assuming that he is correct (which, in my humble opinion he is not), transferring ownership makes display of the cross the responsibility of the federal government, which is the one entity Justice Thomas *does* think is bound by the Establishment Clause.
To be sure, Thomas's view is that the Establishment Clause only prevents government coercion in violation of conscience. And, after all, how could placing a 29 foot Latin cross overlooking the city of San Diego and visible from substantial parts of it bother anybody's conscience, right? (It's not like a 29 foot cross staring down at you from a mountain top would remind you of anything. Com'on, everybody knows that God is watching us *all the time.*).
Perhaps President Bush believed that putting the vast resources of the Gonzales Justice Department in the service of litigating the cross's constitutionality would help persuade the courts that there is no Establishment Clause problem. As I've noted here, the Justice Department has seen fit to change its agendas in the Bush years, hoping, if I may coin a phrase, to the Right back in civil rights. More power to him, I say. There is probably no legal battle more worth throwing government dollars after than this one, except perhaps the Terri Schaivo affair.
Maybe they should have transfered ownership to the Supreme court, so that the cross would fall under the same exemption as the Supreme court building's facade and internal carvings.
Actually, the move isn't totally witless; The federal courts are a lot more interested in enforcing the Constitution (Not that I really believe the 1st amendment compels this conclusion.) against the states, than against the federal government. Call it a federal monument with historical value, and the courts might buy it.