Before Margin Call, 99 Homes and The Big Short, there was this gem of a Swiss docu-drama that should've gotten better play in the States (considering the content) titled Cleveland Versus Wall Street. Produced in 2010 it was set in a courtroom -- sort of Twelve Angry Men meets Judgement at Nuremberg -- postulating a trial of those Wall Street Mega-Banks that had been responsible for turning wide swaths of Cleveland into vast wastelands; all before these self-same banks succeeded in doing the same for the global economy.
Based on an actual lawsuit filed by the city of Cleveland in January, 2008, this should-have-happened trial used real folks -- lawyers, judges, witnesses and jurors -- to weigh in on whether 21 banks (Wells Fargo, Deutsche Bank and Goldman Sachs, among them) were nothing more than irresponsible public nuisances who knowingly peddled mortgages to people who had no realistic means of keeping up with loan payments.
Cleveland's mayor at the time, Frank Jackson, quoted in the Cleveland Plain Dealer, mirrored the thinking of many of his constituents.
To me, this is no different than organized crime or drugs. It has the same effect as drug activity in neighborhoods. It's a form of organized crime that happens to be legal in many respects.
Some of the actors (playing themselves) were directly involved in the lawsuit: Josh Cohen at the plaintiff's table was lead lawyer. Kathleen Engel, a Cleveland-Marshall law professor, appears as a prosecution consultant. In reality, she provided the legal research that underpinned the law suit, namely: municipalities have standing to recover damages inflicted on communities by predatory lenders.
Witnesses for the prosecution were genuinely compelling. Robert Kole, a Cleveland policeman who participated in hundreds of evictions appears visibly upset as he testifies about the impact of foreclosures on the East Cleveland neighborhood where he grew up. Keith Taylor, an ex-drug dealer turned sub-prime mortgage broker, offers insights into how he baited the homeownership hook with all sorts of pie-in-the-sky BS that suckered in vulnerable Cleveland residents; a spiel that allowed him to reap in hefty commissions.
The director, Jean-Stephane Bron, sets up the defense table with a real financial services lawyer, Keith Fisher. While Fisher had no actual role in the lawsuit he does know the terrain and argues that the banks had no culpability in creating the mess. Additional witnesses for the defense include Peter Wallison, a former Reagan White House advisor; unrepentant defender of the free market and proponent of deregulation (to this day), currently serving time at the American Enterprise Institute.
It's straight from the horse's mouth when Michael Osinski appears on the stand and Bron wisely uses him to explain the "mechanics" of sub-prime lending. One of Wall Street's fabled "Quants," the financial engineers who set up the alchemy that transformed mortgages into securities, he's contrite about his role in creating the sub-prime mess.
The courtroom drama reaches a peak with the testimony of Barbara Anderson, an African-American, who moved her family into the formerly all-white working class community known as Slavic Village. As the sub-prime epidemic began to impact homes in her area she mobilized neighbors into a "Street Club" with the goal of keeping vacant homes from falling prey to gangs and drug dealers. Anderson was also active with a community organization, ESOP (Empowering and Strengthening Ohio's People), which put pressure on banks to negotiate with homeowners.
While the trial in the film is make-believe the reality is not and while Bron was at work my company, Pacific Street Films, was also in Cleveland shooting for a documentary, Tale of Two Streets.
Our tour of the devastation was facilitated by those close to the action and they included Gus Chan, an award-winning Cleveland Plain Dealer photographer, who had documented the human misery wrought by foreclosure. David Rowe, a Cleveland policeman, took us on his eviction rounds and like his counterpart in the film was emotional when discussing the situation. Tony Brancatelli, a Slavic Village City Councilman (who appears in the film as a witness for the prosecution), walked us through one of the vacant houses stripped of anything valuable and made the point that while vandals eviscerated homes, the Mega-Banks ripped out the very soul of the community: its population of long-time blue collar residents.
The jury deliberation is a deflated contrivance that doesn't rise to the level of Twelve Angry Men but the outcome isn't a slam dunk either. Bron has intentionally packed the jury with a cross-section of just-plain-folks, from a single mother to a retired soldier with a son fighting in Iraq. Then there are two Tea Party supporters and a Polish immigrant (who sees the US as the land of boundless opportunity) and they remain not-guilty holdouts. Given the Judge's instructions that more than five were needed to convict, their reluctance spells a victory for the defense. The Mega-Banks are off the hook.
It's art imitating life.
The real story, according to Kathleen Engel, parallels the film's outcome, albeit, without the benefit of a trial. After the lawsuit was filed it became an instant hot potato. It bounced around, pin-ball style, between State and Federal courts and on the Fed level it became clear this was mine-field strewed legal territory that judges were reluctant to wade into. By 2011, the lawsuit died an ignominious death
Flash forward five years and we're in Big Short territory. These same Mega-Banks, from Goldman to JP Morgan to Wells Fargo, are settling big time with regulators over the same shenanigans that created the sub-prime crisis and the displacement of millions of homeowners, including those in Cleveland.
Kathleen Engel believes these settlements should raise eyebrows and give pause for thought:
The size of the settlements means they have a lot to hide. They are willing to pay billions of dollars to prevent the truth from coming out. Without lawsuits that include discovery, it is impossible to know the extent of the banks culpability and difficult to gather the evidence needed for criminal prosecutions. Plus, by settling, no law is created.
We can only imagine how trials held today, based on evidence hidden by these settlements, might play out. Then again, like the "X" files, the truth is out there waiting to be discovered.
Note: Cleveland Versus Wall Street is available for screening on VIMEO but be warned to brush up on your French since the overdub does obscure the English underneath.
Joel Sucher is a writer/producer with Pacific Street Films. He's written about the foreclosure crisis for American Banker, In These Times and Huffington Post. Presently he's working on a number of media-related projects pertaining to the 2008 financial meltdown.