By Karen Pierog

CHICAGO (Reuters) - The city of Cleveland has sued 21 banks involved in the subprime mortgage market, seeking monetary damages due to a huge spike in foreclosures, Mayor Frank Jackson said on Friday.

The lawsuit, filed in Cuyahoga County Common Pleas Court on Thursday, claims the banks created a foreclosure crisis by being purveyors of subprime mortgages, leaving the city to "clean up the resulting mess," sustaining hundreds of millions of dollars in damages.

"Cities can rebound, however it is extremely costly to do so given that declining tax revenues are part of the fallout of foreclosures," Jackson said in a statement.

Banks sued were Bank of America (BAC.N: Quote, Profile, Research), Citigroup (C.N: Quote, Profile, Research), Credit Suisse, Deutsche Bank Trust Co, J.P. Morgan Chase (JPM.N: Quote, Profile, Research), Merrill Lynch MER.N, Bear Stearns, Ameriquest Mortgage Co, Washington Mutual (WM.N: Quote, Profile, Research), Countrywide Financial CFC.N, Morgan Stanley (MS.N: Quote, Profile, Research), Well Fargo (WFC.N: Quote, Profile, Research), Fremont General Corp, GMAC-RFC, Goldman Sachs, Greenwich Capital Markets, HSBC Holdings, IndyMac Bancorp, Lehman Brothers, Novastar Financial and Option One Mortgage Corp.

The lawsuit uses Ohio's public nuisance law as a vehicle for seeking damages. The law allows recovery for circumstances created by a defendant that interfere with the public's rights and interests, according to the mayor's statement.

"The unscrupulous lending practices that are part of the subprime market have devastated Cleveland neighborhoods, which clearly demonstrate a public nuisance," the statement said.

The lawsuit points to a steep increase in foreclosures in Cleveland, to more than 7,500 in 2007 from less than 120 in 2002. Cleveland had the 10th-highest foreclosure rate among U.S. metropolitan areas in October, according to RealtyTrac.

Cleveland's action follows Baltimore's filing of a lawsuit earlier this week against Wells Fargo. That lawsuit, in U.S. District Court, alleged Wells Fargo was liable for millions of dollars in damages under the Federal Fair Housing Act for targeting minorities with bad loans and discriminatory and unfair terms that resulted in foreclosures.