It sounds like a scene from “The Wire,” but with palm trees and swimming pools: Gangs run prostitution rings and criminals hide dead bodies in vacant houses. The illegal activities spill over into the rest of the neighborhood, leading to an overall increase in violent crime and stretching police officers and firefighters thin. Property values plummet, creating a vicious circle: Cities have fewer resources to combat these crimes, at the exact time when they need more.
The city of Miami was unwilling just to chalk up these problems to the global economic crisis. Instead, it believed that the root cause of the problems was both closer to home and more pernicious. Banks like Wells Fargo and Bank of America, it believed, were discriminating against African Americans and Latinos when issuing them mortgages, by making predatory loans that were more likely to lead to foreclosures. In 2013, the city went to federal court. It alleged that the banks had violated the Fair Housing Act, a 1968 civil rights law that bars discrimination in the sale, rental and financing of housing. And in doing so, Miami contended, the banks caused the city to lose money.
A federal trial court dismissed the city’s lawsuit, but the U.S. Court of Appeals for the 11th Circuit reversed and reinstated the case. Next week the Supreme Court will hear oral argument on a question that all sides agree is important: whether the Fair Housing Act allows lawsuits like the city’s, or whether – as the banks contend – Miami’s lawsuit instead goes far beyond what Congress intended when it enacted the FHA.