Idiot move of the week, Cleveland suing banks

Like Jeff Foxworty says.....here isyour sign!

Lane,  I would have used a little stronger language than you did !

I hope they don't decide to sue their professional sport teams for failure to win. lol.

Lane - Shirley has pulled some bone-headed moves with regards to real estate in the past, don't give her any ideas. Then you have that raving genius Vincent Fort in Dekalb. But we all know Cleveland is one of the most left winged cities in the midwest and has a tremendous history of failures. Left winged? Dennis Kucinich ring a bell? How about the fact that in spite of almost the entirety of the state voting Republican the union capitol of Ohio - that would be Cleveland - skews strongly blue. Special note that "National City" is headquartered in Cleveland and nowhere near the top of my "good" list.

It's insane.  Seems to me that the mortgage companies have a grand affirmatiive defense of contributory negligence. 

Where were the regulators, licensing people in Ohio when these lenders were breaking what law??

Sounds like a politician looking for some grandstanding.

Wow Lane,

That is unbeleivable. What are those knuckleheads thinking?

Sean Allen

If you go to Callahan's Diary (only highlighting a specific post) it's a running, factual commentary on the banks and the issues. These are not the Lakewood First Federal Savings and Loans or National City's or Third Federals. (Banks local to us in NE OH); they are something else indeed.

I think the question is not will they want to lend money to us but whether we would really want them to? They certainly do not represent all the possibilities.

 Cleveland is in economic crisis because of many other things besides foreclosures so no need to lecture me back about that. It is clear however, that the number of true predatory efforts that occured here are higher than your areas. Seriously, read the link above. You will be amazed.

 I had one of the banks on the list cause me to get no less than 32 phone calls Feb 2006 from people who were given mortgages without any knowledge of how to go about doing it. And no professional help to do it, just contacts from the lenders. All but three of the 32 were related to one of the banks and 28 of the people were connected via neighborhood, family, etc. Through word of mouth they called me., It was the saddest month of my career because I was not able to list their homes.

I have no idea if this is truly a good expenditure of money but I don't think it makes us the laughing stock of the Country. Do I wish my leaders would get their act together and bring in more business and get a handle on a vision for the City? You betcha.  Do  I wish people would become more financial responsible and ALSO educate themselves before purchasing? You betcha. But saying we are a laughing stock because of this is your opinion and certainly not the one of a lot of us here in Cleveland.

Eric, Bill, Jeff, Ken &  Sean - Thanks.  I will defend that this is a dumb idea until someone can show me that these institutions were strong-arming people to get these loans.  

Lenn - I think that a declining city is looking for some free cash.  

Carole - From the link that you gave me, as well as the story, three of the 21 banks had just under 10,000 foreclosures of which you heard about 32 properties.   Twenty-eight of these people were connected, and called you because someone else they knew told them to give you a call.  Hardly a sample representative of anything.  Is the point that these people got mortgages that they didn't understand... but signed off on anyway?  And, do you think that this same group all went out and got mortgages because their friends and family did?  If so, why do you think they did it?  Was it their personal greed ("Look, I just dropped my payment with this loan I don't understand.")

And, Carole, I'm not saying that the people of Cleveland are a laughing stock because of this... although if the idiots responsible get voted back into office, an argument might be made...   I'm saying that the politicians that think they can just get a free lunch or not paying attention to the Law of Unintended Consequences.  There will be negative repercussions for this action, and there should be.  The world is not a vacuum.  The people that took this action are damaging their city economically. 

And Callahan will be getting a negative comment from me.   

We live in such a litigious society it is unbelievable a local government would point the finger.  This kind of ignorance is going to put things in worse condition.

Lane:  This is only the beginning because our cities and counties are suffering from the loss of revenue.  

Baltimore’s mayor and City Council are suing Wells Fargo Bank, contending that its lending practices discriminated against black borrowers and led to a wave of foreclosures that has reduced city tax revenues and increased its costs.

 
New York and Connecticut are conducting investigations into whether the big banks on Wall Street concealed information about securities sold to investors on subprime loans. New York's attorney general has also subpoenaed government sponsored lenders Fannie Mae and Freddie Mac and 30 lending firms, on matters of conflict of interest and how appraisals were done.  "Trillions of dollars" in securities are impacted by the practices under scrutiny.

Bill Callahan - You might think you have sewn up some sort of solid case for this incredibly stupid and frivolous lawsuit... but, no. 

Do you have any numbers to back up the claims of deceived borrowers or collusion?  Probably not... they are a lot lower than you would imagine.  But, you are missing the point, and apparently unaware of what happens when a mortgage is created.  The banks or brokers that originate the loans VERY seldom hold those loans.  They are sold, so that the bank or broker that originated it can take the new money and loan it out to someone else.  So, these companies that compiled these loans made it possible for people to buy homes... otherwise there would have been a shortage of money very quickly. 

And, if you think that the only entities that would consider raising prices or getting out of the market, you are quite wrong.  EVERY company that does business in Cleveland, and in Ohio will be looking at this.  What is their risk of increased cost?  How much will they have to raise the cost of loans to compensate?  Is it even worth it?  If Cleveland wins the lawsuit... it won't be worth it.

You seem to think that there will be a bunch of banks still flush with cash to loan if they don't have a market to sell the loans into.  That would be a mistake. Your "actual banks" won't be able to loan money if they can't sell the loans.  

Now, something we CAN agree on is that the banks and loan buyers had incredibly stupid underwriting policies.  anyone that had a pulse could get a loan for just about anything.  You won't see that happening going forward (at least until their pain subsides).  But, who profited?  

And again, you tossed out the "fraudulent" claim... with no basis.  Is there a backlog of fraud charges waiting to be filed there? 

The real problem is a lot deeper than these mortgages, foreclosures and properties.  The real problem is that Cleveland has done a terrible job at maintaining an economy that can thrive.  Had the city worried more about attracting business, there would have been buyers for the properties.  The values would have risen, and the tax base wouldn't have been eviscerated.  

Further, the city already has several options.  If they are taking the properties, why not auction them off?  There are plenty of investors (even there) that would JUMP at the opportunity to buy these properties at absolute auction.  Instead of spending money demolishing properties, and holding them with no tax basis, they could sell them, and let others GIVE them money... and feed the tax base.  It would probably be at a lower level, but the properties would be in the hands of owners.  Think of the options for low income housing.

But, no, instead, the city wants to attack businesses...  hhmm...  Wondering why the economy is sucking there?

Finally, you are trying to make a case that these lenders and mortgage holders deliberately created a climate where they could lose millions of dollars in foreclosures and property seizures.  Not bloody likely.  Instead, look at the same politicians and their poor performance.  Look at the borrowers that chose to take out mortgages they didn't have a reasonable chance of repaying.  The banks were stupid to loan money, but they didn't use guns to find the borrowers. 

Perhaps, if Cleveland looked at this as an opportunity to grow and bring in new business, instead of trying to get free money, they could prosper in the future.  Instead, they are attacking the very companies that could help in that growth and damaging their citizens by risking increased costs to borrow money in the future, and limiting the ability of low income residents from becoming homeowners...

Good job.   

Joey - No kidding. 

Bill - Exactly, and thanks.

Jan - While I think there needs to be a look at how these instruments were sold and transfered, I think that the retail end is taking care of itself.  I think that if an honest study were done of the racial overtones of the sub-prime mess, the results would show that the loans were based on credit and distress risk of the properties, rather than on race... but that isn't as fun for politicians.  It's always easier to just blame race.  

There are rumblings that the buyers of the MBSs weren't always given honest risk assessments, and the investigation into that will be interesting.  However, I think it is going to end up being a case of the buyers getting the dollar signs in their eyes and buying into a frenzy.  Just like people that bought tech stocks with incredible P/E ratios... based on momentum.  

I think that there were many bad business decisions, but I think there were relatively few criminal acts.   

Its a shame that our country has went from having personal responsibility to creating the new American dream of finding someone to sue.

I had not heard of this so thanks for the education. "crazy" doesn't go anywhere near far enough to describe it. And as Hugh just said, personal responsibility seems to have left town as well as the banks!

AIn't it the American way? Find someone else to blame our situation on and then sue...because it is always someone else's fault!

Hugh - I agree with you whole-heartedly. 

Simon - Personal responsibility hasn't totally left the building.  There still need to be a few people that take responsibility for themselves so that there is someone to sue...

Gary - Up to this point I have refrained from saying anything about the leftist mentality and the proliferation of "victims"...  Now I said it.  

Yes, no kidding, but they did make fun of them on MSNBC today, as well they should, how utterly ridiculous, Cleveland, give me a break, about the only thing they can do right is to destroy their own stadium? Lance

Let's see who we can point the finger at, isn't that becoming the American way.  No one wants to take responsibility. 

Lance - They deserve to be made fun of. 

Marchel - It is, and that sickens me.  

I had breakfast with Ken Cook this morning, and we talked about this for a moment.  I ran across a piece of information earlier today, and he confirmed.  As soon as I can find the supporting documentation, I will be posting a little update that makes not only this, but the whole foreclosure bailout even more disgusting.