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Cleveland suit: overlending as public nuisance



You can't say we didn't warn you about the dangers in lawyers' efforts to develop elastic, inventive "public nuisance" theories for suing unpopular businesses (gunmakers, makers of lead paint in 1920, global warming contributors, etc.) And now, shortly after Baltimore's lawsuit (PDF) seeking recovery from subprime lenders for various sins and insults, the mayor of Cleveland has followed with a yet more absurd and yet more dangerous lawsuit (PDF), this time invoking public nuisance law against not merely originators of mortgage loans, but even financial institutions that later bought the mortgages from their originators. The Cleveland Plain Dealer, in an astoundingly irresponsible editorial for a newspaper of its once-high reputation, actually cheers: "Wall Street should pay", though it concedes the shakiness of the actual filing: "The one-count complaint contains not one legal citation".

Meanwhile, the Baltimore Sun reported over the weekend that "Baltimore's lawsuit against Wells Fargo for its subprime mortgages has stirred up frustration among industry players, who say they're increasingly taking heat for offering loans in poorer and minority neighborhoods despite being urged for years to do just that." Some legal academics are applauding the emerging city lawsuits; see, for example, this post at Credit Slips. Earlier here.

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Isaac Gorodetski
Project Manager,
Center for Legal Policy at the
Manhattan Institute
igorodetski@manhattan-institute.org

Katherine Lazarski
Press Officer,
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.