The $2.4 Billion Goldman Sachs headquarters in New York City opened in 2009.
By Sarah Jaffe / AlterNet / Sept. 2, 2011
In potentially gamechanging news, the New York Times broke the story Thursday night [Sept 1] that the Federal Housing Finance Agency, the federal overseer for mortgage lenders Fannie Mae and Freddie Mac, is filing a pretty big lawsuit against more than a dozen big banks, alleging that they “misrepresented” the quality of the mortgage-backed securities they sold during the height of the housing bubble–the same securities that were made up of predatory subprime loans rolled in with regular mortgages and sold to investors as AAA bonds.
Banks named in the suits include Goldman Sachs, JP Morgan Chase, Deustche Bank, and our old friends Bank of America.
The Times explains:
The suits will argue the banks, which assembled the mortgages and marketed them as securities to investors, failed to perform the due diligence required under securities law and missed evidence that borrowers’ incomes were inflated or falsified. When many borrowers were unable to pay their mortgages, the securities backed by the mortgages quickly lost value.
Fannie and Freddie lost more than $30 billion, in part as a result of the deals, losses that were borne mostly by taxpayers.
This continues the building legal fallout from the mortgage crisis almost exactly three years ago. The economy, of course, still hasn’t recovered from the havoc wreaked on it by the rush to churn out more mortgages, more securities, more inflated home values for the markets to gobble up.
These lawsuits could be worth billions–more details will be known when they are officially filed, either today or Tuesday. A similar suit was filed in July, the Times notes, against UBS, and it sought at least $900 million. Similar suits against the big banks, particularly the already-very-shaky Bank of America, have the industry nervous.
Combined with AIG’s massive lawsuit against Bank of America, the ongoing shakeups in the settlement with the attorneys general (including the latest accusations from the Nevada AG), it seems more and more pressure is mounting to see some sort of reckoning from the finance giants that speculated with our entire economy.
{ 25 comments… read them below or add one }
This sounds too good to be true. Election-year bravado only to collapse in a back-room deal (is that cigar smoke I smell?)…
You hit the nail on the head. Obama will not cut off his donation money.
Yep that is cigar smoke, usually being blown up Obama and Boehner’s ass by Jaimie Dimon and other banksters.
Too big to fail, but not too big to be sued into bankruptcy by the folks who just bailed them out… Maybe we could go after the executives and seize their assets instead. There should be a case for it since it’s money they made off the whole sour deal.
Great, but how can we sue the guiltiest of all, the devil, who tempted the markets, the bank regulators?
The regulators, by permitting the banks to have only a minuscule capital, 1.6 percent when lending or investing in what was ex-ante perceived as “not-risky”, offered the apple that tempted the market and doomed us to this mess.
Without that apple there would never ever have been such a demand for those triple-A rated securities collateralized with lousily awarded mortgages to the subprime sector.
Per,
The regulators and John Walsh of OCC need to be in the jail cells next to Jamie Dimon, Fuld and Blankfein — and a bunch of others. I think they also need to nail whoever the asshole is at Deutsche Bank or is that Douche Bank?? They are one of the biggest offenders in the foreclosure fraud.
Why dont the put barney frank on trial for fraud, telling everyone how safe and sound fannie and freddy are, yet 2 months later they both failed use citizens.. who is suing fannie mae? and why arent they.. they are as guilty as anyone in this mess
Thank you Zap…
Fannie and Freddie lower the lending standards that lead to the problem and were directed to do this by Congress and Mr Frank.
As for Barney…
http://www.youtube.com/watch?v=iW5qKYfqALE&feature=related
Sure, go ahead and trot out a video that is 6 years old to prove your point – like 3 years before everything went bottom up.
The Stock Markets across the globe may witness a blood bath if this news turns out to be true. The banks are already under severe pressure and this could dampen the path to economic recovery
The only thing that makes the politicians and rich assholes that say they start businesses IS THE STOCK MARKET. Let go down. I thought Buffet was a smart guy until he ponies up $5B to Bank of America. They seem to be one of leading criminal forces in foreclosure. Hopefully Buffet told Monyihan to stop being a dick on foreclosing on everything in sight.
This entire fiasco began with the federal government’s push upon lenders to make loans without proper due diligence. So the banks capitalized on it. There are no clean hands and virtually no ethical behavior on anyone’s part.
You said the exact things I was thinking when I read the article. Bravo.
I think we need a dose of truth. I am tired of spin. There are services that federal government should provide, but micromanaging our economy (housing, health care, industries, education, energy…) is not one of them.
In this case, I can remember when one had to qualify to have a loan, when houses were properly appraised, and when people were expected to pay for their bad decisions – in other words, we lived in a more responsible society. As for the banks, we need careful stewardship of our money, not a lot of Ponzi scheme gamblers out for a fast buck.
But in the main I lay this mess at the foot of the federal government. Thanks for your comment.
IF U LISTEN TO THE WAY THOSE CNBC GUYS TALK THEY DON`T WANT REGULATORS LOOKING OVER THEIR SHOULDER AT THE STOCK MARKET ALSO THEY TOOK ALL THE MORTGAGES GOOD AND BAD MIX THEM TOGETHER WITH THE M.E.R.S (mortgage electronic records service ) so nobody knows what mortgage goes to what house !!!!!!!!!!!!!!!!!!!!!!!!!!!the stuff they pulled off normally would put u in a slammer 4 20 years who`s protecting those slimebags?????????????
It seems the Wall Street requirement of No Income Documentation has AT LAST
come back to the banks. After submitting a number of loans for Alt A product and
having them returned because more than a credit score, an address and the borrowers social and name were inclosed..no wonder the entire lending house of cards fell.
Wall street dictated the terms, banks insisted on the details borrowers and brokers
followed those requirements. Were mistakes made along the way yes..but the largest
error causing the most damage was giving the banks billions without the express
requirement that the same banks lower the payment by fifty percent across the board of every loan taken out under subprime and prime guidelines between 2004
and 2007 that would have prevented this huge foreclosure mess lowered the number of empty homes and kept the market in some area of going forward. But the leaders in
congress who were part of the creation of this mess (Thank you Mr. Frank) only made
their contributor base happy not their voting base. We see what happened in 2010 with that plan! All this suing of banks only makes the insurance companies crazy when
they have to pay and pass that loss on once again to we who vote. Umm or could it be
that the government wants to take over the banks? After all they own the mortgage business now..just try and get a mortgage…one in a hundred good credit borrowers can close a loan these days who use a broker or mortgage banker BUT if you go to the bank wait three months accept terms other than those quoted in the beginning AND pay a higher rate and payment then maybe you can close a loan… and this is fixing things!!! NOT
You are right. The money given to the banks should have gone to reduce the burden on those with sub prime loans. Those with teaser rates should have gotten fixed rate loans with government TRAP money.
I have no regret’s screewing the population out millions. i’m haveing a good life in a foreign country.
This is sad, these lawsuits are going to just become higher intrest rates, morr foreclosures and less lending. It is an effect that will just work its way down to homeowners and hard working families.
Foreclosure is NOT an “option”
Ephrem Jando
http://www.stopping4closures.com
When every instinct Obama has tells him to raise taxes, sue the banks, increase regulation, expand government, and follow Kenyesian economics with no economic improvement and no increase in employment, perhaps he should follow the Costanza model and just do the opposite.
http://www.youtube.com/watch?v=cKUvKE3bQlY&feature=results_video&playnext=1&list=PL511C47348842353F
Ok, now that the Feds are trying to protect the investors, what about protecting the homeowners caught up in the mess. Not just due to subprime due diligence issues BUT in the failure of due diligence in doing foreclosures. What about the unemployed due to the BS the banks created and THEN want to foreclose on their homes????
The banks thumbed their nose at HAMP and told Obama and the homeowners to go screw themselves — where is government on that issue??
As part of the 50 AG investigation, NY AG Schneiderman’s investigation and this Lawsuit — it must be included to FORCE THE BANKS to modify loans to a level that every homeowner screwed in this can stay in their house. Congress bailed out the criminals like Dimon, Fuld, Blankfein, Muzzillo and so — all with Wallstreet adressess — where is the help for the rest of the country??????
A letter sent to my Kansas Congressman, Kevin Yoder.
Hopefully you and the KS Senators have finally come to see the reality of the economy and jobs. Drop the religion and abortion issues and really work at putting people back to work, Brownback will keep trying to screw up Kansas.
The politicians from Kansas seem to be mute on the big issues of jobs and housing. Even the KS AG’s silence is deafening on foreclosure fraud. He wants it to go away, he just does not want to work on it. Why is it so hard to see that the foreclosure issue has to be solved favorably for homeowners so that housing can rebound. The banks caused the problem, LET them be penalized. Put some of the CEO’s in jail to send the right message. Forgery, fraud, conversion are all things ordinary people go to jail for —- why not banks? You are an attorney so hopefully you understand this. The banks are making you and other Congressmen look foolish — they are playing you. All they want is off the hook for all the wrongs they committed against America and its citizens. DO NOT LET THEM OFF THE HOOK.
Jobs CAN be created IF you work with the right people. People here will always want to start a business, BUT today as long as YOU let the banks right the rules, no businesses will start. The banks stole the equity from many homes, now those same banks and the SBA still require the same equity to get a loan to start a business — so how does that work??? IT DOES NOT!!!! THE RULES NEED TO CHANGE.
The rich continue to grow at the expense of others. They are not starting businesses, nor are they loaning people anything to start businesses. Giving them lower taxes will not work. HOWEVER, give them an incentive to invest in private companies — not to buy stocks in big public companies. Start a company, create a job — get a rebate or ??? Tie it together — not just a tax decrease. INCREASE TAXES BUT GIVE A JOBS TAX CREDIT OF SOME SORT. That will make the rich put their money where their loud mouth is.
Tell Romney — Companies are not people. While at Bain Capital he had the same problem — DUH. All Bain did was merge companies and put people OUT OF WORK. He has no clue how to create jobs at the grass roots level.
IF the jobs, housing and economy does not show improvement soon —- all of you who stand in the way of changes – will not be re-elected. The obvious arrogance of Boehner and Cantor is killing you. Trust me, I do not like Obama, but the Republicans need to own up to the problems they created and HELP FIX THEM. The Republicans right now are nothing more than a black eye on American politics.
The robosigning scandal needs to be put to rest so legitimate foreclosures can happen. It’s all a big mess, with no winners.
It’s no doubt that the banks and government completely aided the housing bubble through misrepresentations, fraud, and laws. Those who bought their homes during the housing bubble were not privy to the fraud committed by the banks, government, appraisers, etc. The government & community organizers held the banks hostage to give loans to people who did not deserve them. In some cases the banks wrote loans to as owner occupied (i.e 100% financed), despite the debtor had bought mulitple lots in the same neighborhood. The banks were writng 130% loan to value, no income verification, etc . The private appraisers were getting kickbacks to make a high price. The banks would normally have never offered these loans, and considered them a hot potato. So, the banks sold the mortgages to Wall Street. Our government, SEC, was watching PORN and Congressman Barney Frank had a personal relationship with the head of Fannie/Freddie. It was all swept under the matress, while the housing bubble grew & grew.
I thought my area was being increased due to real demand. See, all of Florida was expected to increase due to the aging baby boomers. Jobs were plentiful, businesses were ramping up for the onslaught. It was all a hoax, and I’m now stuck with a mortgage that it almost double the property’s current value. I completely lost my 20% down.
The mortgage refinance program was a joke. The bank wanted homeowners to sign new paperwork (as the bank doesn’t have the originals….we come to find out). The interest rate reduction was to be added as a balloon payment at the end, interest on interest on interest. The balloon payment nets to be the current FMV! So, banks win.
The real solution in a case of fraud in entering a contract is for the judge to rescind the contract or set the contract at fair terms. That includes the price or principal loan balance. Mortgage interest rate reductions are a joke.
This was the deal!
If you convinced risky and broke Joe to take a $300.000 mortgage at 11 percent for 30 years and then, with more than a little help from the credit rating agencies, you could convince risk-adverse Fred that this mortgage, repackaged in a securitized version, and rated AAA, was so safe that a six percent return was quite adequate, then you could sell Fred the mortgage for $510.000.
And this would allow you and your partners in the set-up, to pocket a tidy profit of $210.000.