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Sep 02

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Government Slaps Banks with Lawsuit over Toxic Mortgages

The U.S. Government sued 17 financial firms today, including some of the U.S.’ largest banks, for selling Fannie Mae and Freddie Mac billions of dollars of toxic mortgage back securities.  The suits was filed by the Federal Housing Finance Agency, which overseas both Fannie Mae and Freddie Mac.  Residential mortgage-backed securities were risky investments that turned toxic after the most recent real-estate downturn.

The lawsuit deals with $196 billion of mortgage backed securities purchased by the government entities.  The government did not provide a specific dollar amount it was seeking as damages.  The government seeks to have the purchases cancelled, be compensated for lost principal and interest payments, and be reimbursed for attorney fees and costs.  The government claims that the securities were sold with registration statements and prospectuses that contained materially false or misleading statements and omissions.

The 17 institutions that are named in the lawsuit, include:

Ally Financial Inc., formerly known GMAC LLC

Bank of America Corp.

Barclays Bank PLC

Citigroup Inc.

Countrywide Financial Corp.

Credit Suisse Holdings Inc.

Deutsche Bank AG

First Horizon National Corp.

General Electric Co.

Goldman Sachs & Co.

HSBC North America Holdings Inc.

JPMorgan Chase & Co.

Merrill Lynch & Co. and its unit First Franklin Financial Corp.

Morgan Stanley

Nomura Holding America Inc.

The Royal Bank of Scotland Group PLC

Societe Generale

About the author

Anand Khemlani

I am a founding member of Fulcrum Inquiry, an accounting and economic consulting firm that performs damage analysis for commercial litigation, forensic accountings, financial investigations, and business valuations. I am a Certified Public Accountant (CPA), Accredited in Business Valuation (ABV), a Certified Fraud Examiner (CFE) and am a licensed Real Estate Broker. I regularly serve as an expert witness involving results of my forensic accounting assignments and damage analyses. My resume is available on Fulcrum's website

Permanent link to this article: http://betweenthenumbers.net/2011/09/government-slaps-banks-with-lawsuit-over-toxic-mortgages/

1 comment

  1. MANNY

    Dear Anand,

    is there anything new with this law suit and how will it effect people with houses in deep waters?
    thanks!

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