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FDIC sues big banks over mortgage debt losses
Started:May 21st, 2012 (07:49 PM) by kbit Views / Replies:214 / 0
Last Reply:May 21st, 2012 (07:49 PM) Attachments:0

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FDIC sues big banks over mortgage debt losses

Old May 21st, 2012, 07:49 PM   #1 (permalink)
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FDIC sues big banks over mortgage debt losses

(Reuters) - The U.S. government has filed three lawsuits against a group of large banks over losses on soured mortgage debt purchased by two small Illinois banks that failed in 2009.

Acting as receiver for Citizens National Bank and Strategic Capital Bank, the Federal Deposit Insurance Corp sued a number of banks including Bank of America Corp (NYS:BAC - News), Citigroup Inc (NYS:C), Deutsche Bank AG (GERBK.DE - News) and JPMorgan Chase & Co (NYS:JPM - News).

Seeking a combined $92 million, the lawsuits accuse the banks of misrepresenting the risks of residential mortgages they packaged into securities, causing losses for investors once the poor quality and defective underwriting became evident.

The lawsuits were filed on Friday by the law firm Grais & Ellsworth, which has filed many such lawsuits for other clients over residential mortgage securities.

Two FDIC lawsuits were filed in Manhattan federal court and seek a combined $77 million, while a third filed in Los Angeles federal court seeks $15 million.

Bank of America and Citigroup are the only banks named as defendants in all three cases. Deutsche Bank and JPMorgan are defendants in two cases, and Ally Financial Inc, Credit Suisse Group AG (VTX:CSGN.VX - News), HSBC Holdings Plc (LSE:HSBA.L - News), Royal Bank of Scotland Group Plc (LSE:RBS.L - News), UBS AG (VTX:UBSN.VX - News) in one.

Bank of America spokesman Bill Halldin, Citigroup spokesman Scott Helfman and Deutsche Bank spokeswoman Renee Calabro declined to comment. Spokespeople for JPMorgan did not immediately respond to requests for comment.

David Grais, a lawyer representing the FDIC, declined to comment, as did FDIC spokesman David Barr.

The FDIC has since the 2008 financial crisis filed dozens of lawsuits over failed banks, and has targeted at least 549 officers and directors of 63 different institutions in so-called professional liability lawsuits.

In December, former Washington Mutual Inc Chief Executive Kerry Killinger and two colleagues agreed to a $64 million settlement to resolve an FDIC lawsuit over their role in the biggest failure of a U.S. bank or thrift.

Citizens National was based in Macomb, Illinois, and Strategic Capital in Champaign, Illinois. They had roughly $1 billion of combined assets when they were closed on May 22, 2009.

The cases are FDIC v. Bear Stearns Asset Backed Securities I LLC et al, U.S. District Court, Southern District of New York, No. 12-04000; FDIC v. JPMorgan Securities LLC in the same court, No. 12-04001; and FDIC v. Countrywide Financial Corp et al, U.S. District Court, Central District of California, No. 12-04354.

FDIC sues big banks over mortgage debt losses - Yahoo! Finance

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