City of Cleveland Loses Appeal Against Wall Street in Subprime Mortgage Case
The U.S. Sixth Circuit Court of Appeals ruled against the city of Cleveland's case accusing 21 Wall Street bank and mortgage lenders of creating a public nuisance. The city believes that these lenders caused the current foreclosure crisis engulfing the local economy "through their varying levels of involvement in sub-prime mortgages for real property in Cleveland." In short, risky lending practices. The panel of three Federal judges did not agree. They did not see the direct causation between the lenders actions and the alleged "injury" to Cleveland's economy, which included increased poverty and mass foreclosures. The original case, filed in 2008, pinpointed big name defendants such as Ameriquest Mortgage Company, Bank of America (BAC), Bear Stearns Companies, Deutsche Bank (BSC) and Merrill Lynch (AQS), just to name a few, of engaging in risky lending activities beginning as early as 2003. The city claimed they were responsible for the rise in foreclosures to over 7,500 in 2007, up from fewer than 120 in 2002. Countering this claim and others made by the city of Cleveland, Senior Judge Richard Suhrheinrich wrote in a 15-page opinion that "[t]he case of the alleged harms is a set of actions (neglect of property, starting fires, looting, and dealing drugs) that is completely distinct from the asserted misconduct (financing subprime loans)." The case, formally known as The City of Cleveland v. Ameriquest Mortgage Securities Inc, inspired a documentary called Cleveland vs. Wall Street that took shape in early 2010 and premiered at Cannes Film Festival in May. Write to Christine Ricciardi. The author holds no relevant investments.