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Suing the banks
Posted: Fri Sep 02, 2011 9:47 pm
by Gob
The US is planning to sue more than a dozen major banks for misrepresenting the quality of mortgages they sold during the housing bubble, the New York Times reports.
The Federal Housing Finance Agency will argue that the banks should have known the securities were not sound.
Bank of America, JPMorgan Chase, and Goldman Sachs are to face action, the newspaper quotes sources as saying.
The suits could be filed as early as Friday, it adds.
The Federal Housing Finance Agency - which oversees mortgage giants Fannie Mae and Freddie Mac - blames the banks for failing to perform adequate checks on the quality of mortgage securities they sold on to investors before the financial crisis in 2008.
Fannie Mae and Freddie Mac lost more than $30bn (£18.5bn), partly because of the deals, and had to be bailed out by the government.
The suits follow subpoenas the finance agency issued to banks last year, according to the newspaper.
The BBC's Marcus George in Washington says this is the latest of a number of lawsuits against financial institutions who were involved in the practice of issuing mortgage-backed securities.
However, some executives say the losses were made because of the wider economic downturn.
Others fear further litigation against banks could damage America's fragile recovery, our correspondent adds.
http://www.bbc.co.uk/news/world-us-canada-14758677
Re: Suing the banks
Posted: Fri Sep 02, 2011 10:49 pm
by Long Run
So, we bail out the banks, so we can sue them, so we can bail them out again?
Re: Suing the banks
Posted: Sat Sep 03, 2011 7:08 am
by BoSoxGal
No, we're just trying to get some of our bailout money back now.
Re: Suing the banks
Posted: Sat Sep 03, 2011 5:46 pm
by dales
Repeal their FDIC coverage!
Re: Suing the banks
Posted: Sat Sep 03, 2011 6:47 pm
by rubato
dales wrote:Repeal their FDIC coverage!
So when they go bust the depositors can share the pain?
yrs,
rubato
Re: Suing the banks
Posted: Sat Sep 03, 2011 8:58 pm
by Gob
So if the banks get sued, who will pick up the tab?
Re: Suing the banks
Posted: Sun Sep 04, 2011 5:14 am
by dales
rubato wrote:dales wrote:Repeal their FDIC coverage!
So when they go bust the depositors can share the pain?
yrs,
rubato
I should've added " Threaten to"
I HATE BANKS!
Re: Suing the banks
Posted: Tue Sep 06, 2011 1:34 pm
by Sue U
Gob wrote:So if the banks get sued, who will pick up the tab?
Banks are like any other corporation; they make profits for their investors. Any liability for fraud will ultimately come out of those profits. In this case, the top US banks have been making staggering profits the last few years (and have been keeping that money out of circulation by failing to lend, but that's another rant).
Re: Suing the banks
Posted: Tue Sep 06, 2011 4:48 pm
by Long Run
Situation overview. Regulators do a lousy job overseeing the banks. The banks start making riskier and riskier loans. The economy tanks, and the value of the security backing many loans evaporates. The banks are insolvent or nearly so. Politicians and regulators strumpet further causing a run on the banks who lose all of their once adequate liquidity. Regulators look for scapegoats, over-react and put numerous banks out of business, often the wrong ones (i.e., the ones who had little or nothing to do with making risky loans). 2011, no, that was S&L crisis of the late 1980s and early 90s. Now we are in for a deja vu all over again, it seems.
I don't know if any of this current crop of banks deserve to be sued, but I do not trust that the government regulators can be objective in this process. As an example, ask the shareholders of Far West Federal Bank who won their lawsuit against the S&L regulators who wrongfully killed off their bank.
And given that we bailed out many of these same banks, and those banks have repaid the credit the U.S. government provided, rather than hammering the institutions, maybe the actual individual wrongdoers should be the ones targeted. But again, it would be difficult to allow the regulators to do this since their track record is to avoid responsibility by trying to find others to blame.