The federal government announced plans to file suit against more than a dozen big banks, accusing them of fraud and misrepresentation in connection with the collapse of the housing market.
The Federal Housing Finance Agency, the agency that oversees Fannie Mae and Freddie Mac, has claims aimed at Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among others, for misrepresenting the quality of mortgage securities they assembled and sold during the housing bubble. The suit reportedly seeks billions of dollars in damages.
According to The New York Times, the suit alleges the banks failed to perform the due diligence required under securities laws when assembling mortgages and marketing them as securities to investors.
The suit is the latest bad news for the banks who may not have a settlement with state attorneys general after all. Last week the attorney general of Nevada filed suit accusing Bank of America of repeatedly violating broad mortgage loan modification agreements and is seeking to rip up the deal so that the state can sue the bank over additional allegations of deceptive lending, marketing and loan servicing practices.
While these two suits are good news for those who have complained that the big banks have had to suffer few, if any, consequences for their role in crashing the economy, they offer little immediate relief for struggling homeowners. Hopefully the momentum can continue on in this direction. And if the economy continues to stall and unemployment remains around 10% the pressure to claw-back those banking profits will only increase.
Now if only the political leadership existed to once and for all stand up to the banks and demand immediate relief like loan modifications and debt forgiveness. Then we’d be talking about real progress.
Photo from steakpinball via flickr.
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