Triozzi: Key and National City weren't villainous enough to make Cleveland's suit
When Mayor Frank Jackson announced that the city was suing 21 banks for predatory lending, the move seemed to spawn more questions than answers.
Readers naturally wondered why Cleveland’s National City and KeyBank were absent from the list of defendants? Until 2006, both were involved in the very subprime loans that have left thousands of city homes in foreclosure. At one point, National City’s CEO even said the bank would no longer lend in the city if the rules were tightened to protect homeowners. Can you say “redlining,” boys and girls?
But Cleveland law director Robert Triozzi says the suit isn’t intended to give local villains a pass...
“There are a lot of banks and lenders who were clearly involved at various levels that led to this crisis,” Triozzi says. “What we looked at were the top firms that were part of the securitizing of the mortgages and the numbers of foreclosures attributed to each lender. We chose those that we felt were most responsible and we came up with these 21.”
Triozzi says the city wanted to target banks that were the root of the subprime crisis – mainly Wall Street firms like Merrill Lynch and Goldman Sachs, which financed the loans. “The greed at the Wall Street level – the making money hand over fist – is what made this system work,” Triozzi says. “Because of how profitable this all became, whatever regulations were in place then, completely evaporated.”
In 2002, the city passed a predatory lending ordinance that criminalized everything from exorbitant interest rates to various lending scams. But Attorney General Betty Montgomery, who received generous contributions from the Ohio Association of Mortgage Bankers, promptly sued to have it thrown out. And the Republican legislature, which was also taking big cash from the banking industry, did its best to stop individual Ohio cities from enacting tougher laws.
When the case finally got to the Ohio Supreme Court, where coffers are also well fed by Wall Street, justices voted against the city. “We thought that [ordinance] would be a vehicle to deal with the situation,” Triozzi says. “But because of the courts, we weren’t able to use that tool. So, now, as I’ve been here looking at all the available options, I reached a conclusion that [this was the best way].”
Still, Mark Seifert, executive director for the East Side Organizing Project, says that the suit comes too late. After all, defendants like Ameriquest and Countrywide are now out of business. “As it stands now, they are still legal entities,” Triozzi says. “They still exist in legal terms and we intend to go after them.”
Seifert also says that if the city does win its case, it won’t do much good for the folks who have already lost their homes.
But Triozzi says that’s not the point. “The focus is always on the impact [this crisis] has had on the borrowers and on Wall Street. But outside of the dialogue is the impact on the cities, the taxpayers, and how we have to clean up the mess. We are the truly innocent bystanders because we have to incur such an enormous cost here. We are the ones left holding the bag.” – Denise Grollmus