CLEVELAND - The city of Cleveland, an epicenter of the nation's home foreclosure crisis, has sued 21 banks and claimed their subprime lending practices created a public nuisance that hurt property values and city tax collections.
The lawsuit was filed Thursday in Cuyahoga County Common Pleas Court, and seeks to recover hundreds of millions of dollars in damages, including lost taxes from devalued property and money spent demolishing and boarding up thousands of abandoned houses.
Cleveland Mayor Frank Jackson said Friday that the buying and selling of high-interest mortgages by some of the nation's biggest banks had devastated city neighborhoods struggling to recover after the loss of manufacturing jobs.
Brace yourselves, taxpayers of America. You're going to help Bank of America finance its $4 billion buyout of Countrywide.
By Allan Sloan, senior editor at large.
NEW YORK (Fortune) -- Guess who's helping Bank of America pay for its $4.1 billion purchase of Countrywide Financial? Answer: The taxpayers of the United States.
That's because Bank of America (BAC, Fortune 500), which is solidly profitable, will be able to use some of Countrywide's losses to offset its own taxable income. The tax break could total about half a billion dollars over the first five years, according to an estimate by tax guru Robert Willens, who left Lehman Brothers Friday after a 20-year run and will be in business as Robert Willens LLC starting next week. The losses could be worth considerably more to Bank of America starting in the sixth year, depending on how big Countrywide's losses are when Bank of America formally acquires it.
At this point, of course, no one knows how much in losses Countrywide has run up since the junk mortgage market began souring and defaults accelerated. Countrywide (CFC, Fortune 500) itself probably doesn't know. But it seems almost certain to ultimately be in the billions.