The mortgage debacle is now the target of government lawsuits. The Federal Housing Finance Agency is going after Bank of America, Goldman Sachs, JP Morgan and Deutsche Bank, according to the New York Times.
The suits stem from subpoenas the finance agency issued to banks a year ago. If the case is not filed Friday, they said, it will come Tuesday, shortly before a deadline expires for the housing agency to file claims.
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.
Not everyone think the suits are a good idea.
Investors fear that if banks are forced to pay out billions of dollars for mortgages that later defaulted, it could sap earnings for years and contribute to further losses across the financial services industry, which has only recently regained its footing.
Bank officials also counter that further legal attacks on them will only delay the recovery in the housing market, which remains moribund, hurting the broader economy. Other experts warned that a series of adverse settlements costing the banks billions raises other risks, even if suits have legal merit.
And what about the politics of the suits? What will the tea partyers make of them? After all, enemy #1 (Wall Street, TARP) is the target of Enemy #2 (Obama). Wow! That should stir up the bacteria in that stained and cracked little teapot!
