Tuesday 26 February 2008

Cleveland - Subprime Ghost Town

For those who can get their hands on it there is a very good piece on the fallout of the subprime crisis in the US on page 8 of the business section of the Sunday Times (Feb 24th). It goes into some detail on the human cost this major financial scandal is having on the average ex-homeowner in Cleveland, Ohio, the centre of the greatest fallout from the subprime crisis. I can't find it online but I'm sure it is there somewhere.

Cleveland Mayor Frank Jackson has filed a lawsuit against 21 major investment banks that he said have enabled the subprime lending and foreclosure crisis in his town. The lawsuit uses Ohio's public nuisance law as a vehicle for seeking damages. The law allows recovery for circumstances created by a defendant that interfere with the public's rights and interests.

The firms are accused of creating a public nuisance by making mortgages available to people who had "no realistic means of keeping up with their loan payments." A dozen of the banks also collectively filed thousands of foreclosures in Cuyahoga County over the last four years.

Jackson has said; "Subprime mortgages have proved as bad as drugs in the destruction they have wrought on the community."

The one-of-a-kind suit includes institutions such as Deutsche Bank, Citigroup, Bear Stearns, Goldman Sachs, Merrill Lynch, Morgan Stanley, HSBC Holdings, Lehman Brothers and Wells Fargo.

Of course the chances that such an action will make the banks mend their ways is highly unlikely, but it is good to see someone prepared to make a stand to show that there is a human cost to the 'creative financial packages' that are invented to constantly increase voracious banks' desire for ever growing profits.

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