Wall Street 1, Cleveland 0: City can't sue banks for bad loans

By David Ellis, staff writer


NEW YORK (CNNMoney.com) -- The City of Cleveland's long-standing battle to pin its housing woes on Wall Street may have finally gone bust.

On Tuesday, a panel of federal judges rejected the city's appeal to pursue a lawsuit that charged nearly two dozen top banks with creating a "public nuisance" by dealing in bad loans.

In 2007 alone, Cleveland suffered more than 7,000 foreclosures and had four of the top 21 ZIP codes for bad loans. Many of those properties were being abandoned and turning to blight.

So in 2008, city officials sued the banks, hoping to recover hundreds of millions of dollars in damages for lost property tax revenue, the cost of demolishing abandoned homes and the cost of policing neighborhoods pocked by foreclosures.

But judges for the U.S. Court of Appeals for the Sixth Circuit dashed their hopes and rejected the notion that banks named in the suit -- including Goldman Sachs (GS, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) as well as now defunct firms such as Countrywide or Bear Stearns -- were responsible.

Rather, they suggested that at least part of the blame lay with the companies that sold the mortgages as well as the individuals who signed up for the loans.

"The injuries that Cleveland alleges could have been caused by many other factors unconnected to the Defendants' conduct," wrote Judge Richard Suhrheinrich.

A spokesperson for the City of Cleveland was not immediately available for comment.

Cleveland is one of a number of cities across the country that has struck back at the banking industry for their role in fueling the housing market collapse.

Baltimore has pursued a similar case against Wells Fargo (WFC, Fortune 500), suggesting that the city's neighborhoods became unsafe and a public health threat as a result of the bank's discriminatory lending practices.

The cities of Chicago and Memphis have also filed separate suits against the California-based lender, suggesting it steered minorities, namely African Americans and Latinos, into subprime mortgages. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 16,501.65 0.00 0.00%
Nasdaq 4,148.34 21.37 0.52%
S&P 500 1,878.61 3.22 0.17%
Treasuries 2.69 0.00 0.07%
Data as of 10:30pm ET
Company Price Change % Change
Facebook Inc 60.87 -0.49 -0.80%
Bank of America Corp... 16.34 -0.03 -0.18%
Microsoft Corp 39.86 0.17 0.43%
Verizon Communicatio... 46.28 -1.15 -2.42%
Micron Technology In... 26.16 -0.09 -0.34%
Data as of 4:01pm ET
Sponsors

Sections

Officials recommend that states allow Tesla to sell cars directly to consumers and argue that banning those sales stifles competition. More

Hundreds of postal workers nationwide protested outside Staples' stores on Thursday. More

Federal regulators are poised to lay down new rules of the road for how Americans access the Internet. More

Schwinn, Trek and Cannondale are all iconic American bicycle brands. But none of them are made in the United States. More

Do you feel like you are overworked? Here are how other people deal with the stress and politics in their jobs. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.