Thursday, January 17, 2008
So, foreclosed homes are a blight upon your city, encouraging crime and arson, battering your already stressed community, and causing a further drop in limited tax revenues. What’s a poor city to do? In the case of Cleveland, the city has decided to sue a number of large investment banks, asserting that their actions in securitizing “subprime” loans constituted a “public nuisance,” which is a tort that could lead to a huge financial damage award to the city. A nuisance is the use of land that causes a significant invasion of another’s use or enjoyment of their land, in a manner that is unreasonable under the circumstances. If the nuisance affects a public interest or public land, it can constitute a public nuisance. The concept of nuisance is notoriously slippery, and has in the past been uses to stop land uses such as strip clubs and polluting factories. But is seems rather novel to use it against a bank. In fact, the city has not sued small Cleveland lenders, but rather those big out-of-town banks, such as Bank of America and Deutsche Bank, that securitized the loans. Here’s a skeptical and insightful column from yesterday’s Plain Dealer.