Supreme court favors Miami to sue banks for economic side effects of biased lending practices which led to the foreclosure crisis, destroying financial stability, the city claims.
Miami, the city was hit hardest and made claim to the Supreme Court, to recoup what it had lost in financial institutions hands. A linear regression chart was presented to point that black borrowers were targeted and were more likely to obtain a subprime loan. A loan made primarily to minority neighborhood was probably six times higher resulting in foreclosure when compared to the white neighborhood.
Supreme court justices were reluctant to allow cities to use Housing Act to compensate for the damages because it might open a new door to landslide lawsuit and it would also be difficult to ascertain an accurate amount of their claim.
Miami sued Wells Fargo, Citigroup, and Bank of America for lending, sale or rental of housing discrimination. The concept of “United States Fair Housing” lacks behind. Robert C.Peck, the founder of the CCL (Center for Constitutional Litigation) and Miami representative says that they can prove “African Americans were offered loans at very high-interest rates, which destabilized city’s neighborhood poorly.”
On the other hand, the bank representative Neal K. Katyal, said that “The city wasn’t entitled under the Federal Housing Authority to claims for compensation, trying to collect money on account of injuries it suffered.”
But Katyal statement received a clear rejection from Elena Kagan, a US Supreme Court associate justice. The FHA wasn’t meant to protect individuals only, it’s a very distinctive anti-discrimination body which focuses on community, she said. Katyal didn’t dispute that the city cannot qualify for a claim and can be protected under FHA statue.
But the thought to agree with Miami city is still in process because it could give rise to endless litigation and would be difficult to figure out how much the foreclosure crisis end up costing the city.
Peck said, the similar cases of Memphis and Baltimore were previously won by the federal government, each resulted below $10 million. Katyal said that the Miami lawyers are claiming damages for hundreds of million dollars for the suit and ended up by saying “There are 19,300 American cities, adopting Miami theory, means that all other cities could come up with the same complaints in future.”