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City Of Cleveland Continues To Seek Damages Stemming From Sour Subprime Mortgages

Friday, December 30, 2011 at 5:41 PM

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As Occupy Wall Street movements sprung up around the country this fall, the City of Cleveland continued its own battle against some of the country's biggest banks and mortgage companies, including Wells Fargo and Bank of America. The city has been in court nearly four years now seeking money from the banks for damage caused by the subprime mortgages that went bad. The latest ruling came in November, and so far it's been a string of losses for the city. Ideastream intern Katie Broida has this update of the case and some far flung interest in it.

Cleveland has struck out four times in court since it first started filing lawsuits in 2008 against 21 of the biggest banks and mortgage companies involved in subprime mortgages in Cleveland .  A federal district judge dismissed the case; then a federal appeals court, then the U.S. Supreme Court declined to hear the case and in November a Cuyahoga County judge booted most of the city’s case. 

Cleveland alleged that the financial institutions were responsible for the foreclosure crisis that shattered homeowners and neighborhoods through subprime mortgage schemes, and that these institutions should pay for damages. But the courts found that the city could not prove a direct relationship between banking practices and the plight of the city; besides, the judges said…Cleveland has no authority to regulate mortgage lending.

Only a thin shred of its original case remains to be decided, the claim that the banks should reimburse the City for millions of dollars of demolition costs for thousands of homes left rotting and abandoned after the subprime mortgages go sour. Over the last 6 years, the city of Cleveland has spent over 40 million dollars on demolitions alone.

Though the case has been dying in court, this unusual maneuver to sue Wall Street’s biggest banks has brought national and international attention to Cleveland for years. Just last week 60 Minutes featured Cleveland in a story about it’s demolition problems, and earlier this month a French theater troupe, Theatre du Shaman, visited Cleveland to do research for the latest adaptation of the subprime story, but this time for the stage.

I spoke with two people from the theater troupe when they were here in Cleveland, and they said they came to visit because of a film about Cleveland’s lawsuits called Cleveland vs Wall Street. It premiered almost two years ago at the Cannes Film festival in France, and it’s still a topic of conversation there among people interested in the world’s financial meltdown that sprung from a collapse of the U.S. housing market. Frank Besson and David Moccelin, both production technicians for the French theater group, say the Cleveland vs Wall Street film had a big impact on them and on people through out France.

BESSON:  “The film was in a lot of cinema. We see reality, what is the problem for the ordinary people, and it’s very impressive”

MOCCELIN:  “Oui oui oui, yes! It’s a very important film for us because what happens in America can happen in France”

On their visit here the French theater crew met Barbara Anderson who played herself in the movie.  She lost her house to foreclosure and is a community organizer for others caught up in the subprime mortgage quicksand.  She told them how surprised she was at the amount of European interest in the Cleveland story and its struggle against big banks.  She traveled through France, Switzerland and Germany to tell her story at the film’s openings

ANDERSON:  “The major foundation of most questions was ‘how and why did it happen?’ Then the next thing was, ‘What is America going to do about it to keep it from ever happening again?’ “

In the movie version, Cleveland loses its case against the banks, and this has turned out to be a pretty accurate prediction of what’s happened.  Each time the case has been to trial, it’s been struck down almost completely.

Despite the judicial rulings, Joshua Cohen, the private lawyer hired by the city to argue its case, dismisses any suggestion that the nearly 4 year battle was at all frivolous.

COHEN:  “We did see it as winnable. We knew it was a difficult case, and that we were dealing with sort of unchartered territory because we were dealing with subprime loans, which was a new phenomenon, but we were dealing with well-established legal principles”

Cleveland Mayor Frank Jackson defends the pursuit of the banks.

JACKSON:  “If we would have won at the federal court, it would have set a precedent that would have reverberated throughout the country. Even though the Court will say they had a legal basis for dismissing the case, I do believe they looked at it as what would be the repercussion of the city of Cleveland winning because it really talked about how(integral those decisions were on Wall St and with the large banks, and the damage it caused throughout the country, and in some cases the world. It would have been a very broad reaching decision”

The Cuyahoga county court has left one window open. It still has to decide if the banks are potentially liable for millions of dollars of demolition costs for crumbling Cleveland homes. That part of the case will be heard at some point in the future.

Mayor Jackson says no matter what, the city will keep fighting.

JACKSON:  “Well we’ll keep appealing and keep trying to find ways to skin a cat. Just because you lose one way doesn’t mean there’s not another way to deal with this.  We will persist to achieve justice in this regard.”

Cleveland is not alone in failing in what it considers a search for justice. The U.S. Justice Department hasn’t successfully prosecuted any criminal cases against high-ranking Wall Street players at the center of the financial crisis. 

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Economy, Housing/Real Estate, Courts/Crime - Fire/Law Enforcement, Government/Politics

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