Story link: US agency sues Barclays, HSBC and RBS
by Gill Montia
Barclays, HSBC and Royal Bank of Scotland (RBS) are listed among 17 financial institutions being sued by the US Federal Housing Finance Agency (FHFA) over the sale of residential mortgage-backed securities (RMBSs).
The FHFA came into being in 2008 when US state-backed mortgage lenders, Fannie Mae and Freddie Mac, had to be rescued, and law suits filed in federal courts yesterday allege violations of federal securities laws and common law, in the sale of RMBSs.
The agency is seeking damages over claims of negligent misrepresentation, having concluded that some of the losses incurred by Fannie and Freddie after the collapse of the RMBS market are attributable to “misrepresentations and other improper actions by the firms and individuals named”.
Specifically, the FHFA alleges that the loans had “different and more risky characteristics than the descriptions contained in the marketing and sales materials provided”.
In addition to the firms, the action extends to “certain of their officers and various unaffiliated lead underwriters”, although no names of individuals have yet emerged.
As well as the aforementioned UK banks, the financial institutions involved are: Bank of America; Citigroup; Countrywide Financial; Credit Suisse Holdings (USA); Deutsche Bank AG; First Horizon National Corporation; General Electric Company; Goldman Sachs; JPMorgan Chase; Merrill Lynch / First Franklin Financial; Morgan Stanley; Nomura Holding America and Société Générale.
RBS is the only UK bank to have made a comment so far, having told the BBC that it will “vigorously defend” itself against the FHFA’s allegations.
Story link: US agency sues Barclays, HSBC and RBS
News reported: September 3, 2011