Federal government sues major banks over Fannie and Freddie losses

[Emit]

The Federal Housing Finance Agency, the regulator overseeing Fannie Mae and Freddie Mac, on Friday sued 17 major domestic and foreign banks, alleging they sold at least $196 billion worth of toxic mortgage securities to taxpayer-backed Fannie and Freddie in the years leading up to the financial crisis.

The suits target Bank of America, Citigroup, J.P. Morgan Chase, Goldman Sachs and General Electric, among others. Fannie and Freddie executives knew these securities — subprime loans and other riskier products — could lead to losses. But FHFA argues in its complaint that the securities were even shakier than Fannie and Freddie executive realized, because mortgage lenders had lied about the ability of borrowers to repay the loan or engaged in other fabrications.

Fannie and Freddie have lost nearly $200 billion as a result of the housing crash and the recession. Those losses largely have been plugged by taxpayers under a deal arranged in September 2008, when the government seized the two firms to keep them from failing.

The suits target the banking industry nearly three years after the housing market collapsed and credit markets froze up, forcing the government to commit hundreds of billions of dollars to stabilizing the financial sector. The abundance of mortgage-backed securities that banks created in the lead-up to the crisis has cost them dearly in recent years.

~snip~

http://www.washingtonpost.com/business/economy/federal-government-to-sue-major-banks-over-fannie-and-freddie-losses/2011/09/02/gIQAPom7wJ_story.html

[Poll_Blind]

1. This...is awesome news! I'm hoping it doesn't end in a bullshit settlement.

Here's hopin'!

PB

[sfpcjock]

2. Compare to what the Bags say: "Oh, Freddy/Fanny, it's awful they should hold 75% of US mortgages."

...Oh, woe is Bill Kristol, __fill_in_the_blank__!

Like the toy piggy bank is ever going to magically hold our mortgages next, LOL.