Banking Law

Last January, when I referred to the city of Cleveland, Ohio as a "steaming heap of bat guano," I misspoke. The pile isn't "steaming," it's merely smoking. It's the mayor of Cleveland, Frank Jackson, who's steaming, most recently over a federal district court judge's dismissal of the laugh-worthy lawsuit filed by the city of Cleveland against investment banking institutions that securitized subprime mortgage loans. According to the city, the implosion of  subprime mortgage loans is the reason that Cleveland no longer "rocks" like it did when comedian Drew Cary based his hit television sitcom there. Therefore, the banks and investment banks that made and securitized such loans must pay Cleveland for the resulting downward slide of Cleveland from the rival of Florence that it was before the first subprime mortgage loan was made there to the Calcutta-like fetid slum it has since sadly become.  As I said last year, the suit was "an opportunistic, and in some respects ingenious and disingenuous, attempt to secure a federal bailout without actually using tax dollars..." I also made some other predictions about how this suit might play out and, apparently through the operation of pure dumb luck, I guessed correctly. From my January 2008 post:

Proving causation is going to be a bitch difficult task, especially when there are so many unclean hands touching not only the relatively recent subprime mortgage meltdown, but the apparent sink hole in which the City of Cleveland finds itself today. At least, if the Mayor is to be believed, the city is in need of hundreds of billions of dollars due to the devastation "caused" by CDOs, so things must be horrible there. Of course, the loss of over half of your population didn't happen overnight, unless there was a nuclear explosion I missed. Crime, poverty, high taxes, a business-unfriendly environment, a lack of cohesive vision for the future and the will to implement that vision even if it existed, all might have had something to do with Cleveland's present woes, and we'll see how the defendants parse the nuances and apportion the blame when they fire back at the Mayor. My guess is that the defendants' first order of business may be to try to get the suit removed to federal court from the home town Cuyahoga County Common Pleas Court. After that, I expect that there will be much maneuvering over motions to dismiss.

The defendants did get the suit removed to federal district court where judge Sara Lioi carved the mayor's backside a new opening that nature did not intend it to possess. As predicted, no causation could be shown by the city. From the recent article on dismissal in the Cleveland Plain Dealer linked above:

In a 36-page decision (download PDF file), Lioi ruled that the city's public nuisance complaint was "pre-empted" by a section of Ohio Revised Code that does not allow municipalities to regulate lending.

She also wrote that the city failed to demonstrate an unreasonable interference with a public right and that the city did not prove that the banks named in the suit caused the damages.

Application of the law, combined with a logical thought process: a toxic brew for any politician to swallow. Apparently embracing the positions that he's too dumb to be stymied by reality and that he'll cease litigating only when he's thrown out of office or the city runs out of money, whichever occurs first, the mayor vowed to appeal the dismissal. As one of the more charitable commenters to the newspaper article put it, "[t]his was a baseless attempt by an inept mayor to deflect scrutiny of his own administration. Frank Jackson is what's wrong with this country. This just shows why his kind should never be in politics or any position of power!" Other commenters were, shall we say, a bit more "blunt."

Rock on, Frankie!