The bending of public nuisance laws to justify cash-edacious litigation is reaching absurd levels.
Last Thursday, the city of Cleveland filed suit in Cuyahoga County Commons Pleas Court against 21 banks — against Wall Street, in the usual invidious phrasing — claiming their subprime lending practices violated the state’s public nuisance laws. A news release from Mayor Frank Jackson’s office was soon overshadowed by Jackson’s quote at a news conference: “To me, this is no different than organized crime or drugs. It has the same effect as drug activity in neighborhoods. It’s a form of organized crime that happens to be legal in many respects.”
As Walter Olson notes at PointofLaw.com, the suit targets not just the originators of the mortgages, but the institutions that bought them. Why not Fannie and Freddie, too, as secondary-market malefactors?
The Cleveland Plain Dealer published an outrageous editorial hailing the lawsuit, “Cleveland’s lawsuit against Wall Street is bold, and a little shaky.” And here’s the lead from Sunday’s Plain Dealer story on the lawsuit: “Cleveland’s lawsuit against 21 investment banks is likely to inspire similar efforts from cities and even homeowners who feel they have been hurt by foreclosures.”
We seriously doubt that Ohio’s legislators contemplated this kind of abuse when they passed the public nuisance law, but unrestrained, populist politicians can be creative, dangerously creative. And who will be the next target?
Oh, yes, by the way: Baltimore suing Wells Fargo. Such a strange theory: How dare you respond to political pressure to extend loans to non-credit-worthy buyers. The city casts the suit in racial terms.
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