Federal regulators filed suit on Friday against more than a dozen leading banks, seeking billions in compensation for huge losses suffered by Fannie Mae and Freddie Mac on mortgage-backed securities the banks assembled during the housing boom.
Bank of America, Goldman Sachs, JPMorgan Chase, Deutsche Bank, Citigroup, Barclays and Morgan Stanley are among the defendants in the suits, brought by the Federal Housing Finance Agency, which oversees Fannie and Freddie.
The agency’s plan to file the suits was reported on Thursday night by The New York Times.
In the suit filed against Bank of America, the agency alleges that bank sold securities that “contained materially false or misleading statements and omissions.” The company and several individual bankers named as defendants “falsely represented that the underlying mortgage loans complied with certain underwriting guidelines and standards, including representations that significantly overstated the ability of the borrowers to repay their mortgage loans,” the suit says. Fannie Mae and Freddie Mac bought $6 billion in securities from the bank between September 2005 and November 2007.
The legal action opens a broad front in a rapidly growing attempt to force the banks to pay tens of billions of dollars for helping stoke the housing bubble. It was the collapse of the housing market that helped prompt the financial crisis in 2008, and the hangover is still being felt in the housing sector as well as the broader economy.
The litigation also marks a more intense effort by the federal government to go after the financial services industry for its alleged mortgage misdeeds. The Obama administration as well as regulators like the Federal Reserve have been criticized for going too easy on the banks, which benefited from a $700 billion bailout package shortly after the collapse of Lehman Brothers in the fall of 2008.
Much of that money has been repaid by the banks — but the rescue of the mortgage giants Fannie and Freddie has already cost taxpayers $153 billion, and the federal government estimates the effort could cost $363 billion through 2013.
This article “Bank Suits Over Mortgages Are Filed“ originally appeared at The New York Times.
Not everyone can pay for the news. But if you can, we need your support.
Truthout is widely read among people with lower incomes and among young people who are mired in debt. Our site is read at public libraries, among people without internet access of their own. People print out our articles and send them to family members in prison — we receive letters from behind bars regularly thanking us for our coverage. Our stories are emailed and shared around communities, sparking grassroots mobilization.
We’re committed to keeping all Truthout articles free and available to the public. But in order to do that, we need those who can afford to contribute to our work to do so.
We’ll never require you to give, but we can ask you from the bottom of our hearts: Will you donate what you can, so we can continue providing journalism in the service of justice and truth?