Ninth Circuit: Oakland Can ’t Sue Wells Fargo Over Risky Mortgages

Walter OlsonIn a welcome development, a unanimous en banc panel of the Ninth Circuit has called what we may hope is a permanent halt to a reckless campaign under which city governments have sought to mulct bank shareholders by way of a strained theory of fair ‐​housing liability.Following the housing bust of the late 2000s, some American cities signed up with contingency ‐​fee plaintiff’s counsel to sue bank lenders on a highly ambitious legal theory: by extending too many risky loans to minority borrowers on dangerous terms (e.g., low ‐​money‐​down loans with adjustable interest rates), the banks had foreseeably caused a later wave of delinquencies and foreclosures. The banks should be made to pay damages to the city administrations, so the theory went, because the foreclosure wave had impaired municipal finances by lowering property tax collections and requiring the spending of more money on services such as fire and police in blighted neighborhoods. (All of these was strictly aside from lawsuits filed by or on behalf of the borrowers themselves.)The U.S. Supreme Court gave an indirect boost to ideas like these when by a narrow majority it approved the use of “disparate impact” theories in housing discrimination law, whether or not intended to discriminate, in the otherwise unrelated 2015 case ofTexas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. Then in the 2017 case ofBank o...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs