FHFA to sue major banks for mortgage losses

[robertlouis]

From the BBC News website this morning.

US regulator to sue banks over subprime mortgage losses

US authorities are to sue 17 major banks for losses on mortgage-backed investments that cost taxpayers tens of billions of dollars.

The Federal Housing Finance Agency said it was taking action against banks including Goldman Sachs, Barclays, Bank of America, Deutsche Bank, and HSBC.

The agency says they misrepresented the quality of the mortgages they sold during the housing bubble.

The values plunged as the US was engulfed in the financial crisis.

The FHFA oversees mortgage giants Fannie Mae and Freddie Mac.

The two firms lost more than $30bn (£18.5bn), partly because of their investments in the subprime mortgages, and were bailed out by the US government.

Since the rescues, US taxpayers have spent more than $140bn to keep the firms afloat.

Other banks facing action include Royal Bank of Scotland, Nomura, Deutsche Bank, Citigroup, and Societe Generale.

A spokesman for RBS said: "We believe we have substantial and credible legal and factual defences to these claims and will defend them vigorously."

Speculation in recent days that the FHFA was about to launch legal action had led to falls in US bank share prices.

The FHFA said in a statement that there were "improper actions by the firms and individuals... Based on our review, FHFA alleges that the loans had different and more risky characteristics than the descriptions contained in the marketing and sales materials provided to the Enterprises for those securities."

Major banks are already negotiating with the attorneys general of all 50 states to settle mortgage abuses.

The banks were looking for a comprehensive deal that would protect them from future litigation.

But the FHFA's action may complicate attempts to reach a deal with the states.

[yodajazz]

One thing that gets me, is how conservative religious groups have focused on gay marriage, as a symbol of morality, and the unborn, but completely ignored the actions of the financial industry. I read somewhere that the average mean household lost like 25% of its wealth, related to all of this. So this has afffected the average person, much more than a gay marriage will ever do. And likewise, someone pointed out how the tea party, is completely focused on government as the problem, while ignoring the impact of the financial industry and business, in the total picture.

I wont judge whether the new proposed lawsuit is good or bad. However, my gut instinct tells me that it is good to bring some more public attention to this reality. The financial industry hopes to settle things quietly. Take for example Goldman Sachs was fined over 500 million by the SEC, however they got the SEC, to not divulge the exact reason for the fine, through a settlement agreement. But even in a case where the cause was known, there were no jail time given; just fines. Angelo Mozillo, CEO of Countrywide was fined 78 million dollars, for selling 130 million dollars of his own stock, when he knew the his company was collapsing. However, he was given probation on criminal charges. I amy be wrong, but it looks to me like he still made 62 million. I see drug boys in my neighborhood getting years of jail time for having $1,000 worth of drugs, and have all their material possessions confiscated. And its not like they were pushing people to use drugs, people sought them out. Yet the financial industry avoids real prosecution, after wiping 1/4 of the word's wealth.