News / Economy

    US Banks Face Federal Lawsuit Over Mortgages

    Bank of America booth at the Pacific Coast Builders Conference in San Francisco, California, June 23, 2011.
    Bank of America booth at the Pacific Coast Builders Conference in San Francisco, California, June 23, 2011.

    News reports say the United States government will sue major banks for allegedly misrepresenting the quality of mortgage securities they sold before the financial crisis.  The news comes after a volatile August on U.S. markets for banking stocks, which finished the month 15 percent lower.

    Bank of America, JPMorgan Chase, Goldman Sachs, and Germany's Deutsche Bank are among more than a dozen banks that news reports say the U.S. Federal Housing Finance Agency will sue.

    The agency is expected to argue that the banks missed evidence that borrower incomes were falsified, and then packaged mortgages to sell as securities.

    Mark Lamkin, president of Lamkin Wealth Management, says banks are not the only ones to blame for the collapse of the housing market in 2008.

    “They should be suing the rating services.  The banks can’t rate their own portfolios.  They have to go to the S&Ps and Fitches of the world to get these things rated.  Had they not rated these things Triple-A, then they never would have been sold like they were sold,” Lamkin said.

    Lamkin says lax government regulation and consumer ignorance also contributed to the crisis.

    Officials at the Housing Finance Agency would not comment on the reports of a lawsuit.

    News of the legal action comes after a volatile August that saw bank share prices plummet 35 percent at one point.  

    Mark Lamkin says the lawsuit places additional pressure on bank profits, but will not necessarily frighten investors in the short term.  However, things could change.

    “If the numbers get eye-popping (surprisingly large) and banks have to raise capital or banks really talk about bailout or the FDIC (Federal Deposit Insurance Corporation) coming in -- if it gets to that point, then yes, you’re going to spook markets, consumers and then some,” Lamkin said.

    The U.S. stock market tumbled on Friday with the release of a dismal jobs report.  

    James Sweeney, editor of the New York Financial Press, says several risk factors could hurt bank stocks.

    “We have so much more coming out, whether it be the Fed chairman’s speech in the middle of September, whether it be further jobless claims figures, whether it be employment data -- private, public.  There is so much more to be answered in terms of whether volatility is possible,” Sweeney said.

    The collapse of the U.S. housing market sparked a global financial crisis.  Sweeney notes that in a globalized economy, American banks are in turn affected by events overseas.  He points to Europe, whose banks are being hurt by unemployment and sovereign debt problems in several nations.

    You May Like

    Russian-speaking Muslim Exiles Fear Possible Russia-Turkey Thaw

    Exiled from Russia as Islamic radicals and extremists, thousands found asylum in Turkey

    US Presidential Election Ends at Conventions for Territorial Citizens

    Citizens of US territories like Guam or Puerto Rico enjoy participation in US political process but are denied right to vote for president

    UN Syria Envoy: 'Devil Is in the Details' of Russian Aleppo Proposal

    UN uncertain about the possible humanitarian impact of Russian proposal to establish escape corridors in Aleppo

    This forum has been closed.
    Comments
         
    There are no comments in this forum. Be first and add one

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Uganda Unveils its First Solar-powered Busi
    X
    July 28, 2016 4:16 AM
    A solar-powered bus described by its Ugandan makers as the first in Africa has made its public debut. Kiira Motors' electric bus, Kayoola, displayed recently at a stadium in Uganda's capital. From Kampala, Maurice Magorane filed this report narrated by Salem Solomon.
    Video

    Video Uganda Unveils its First Solar-powered Bus

    A solar-powered bus described by its Ugandan makers as the first in Africa has made its public debut. Kiira Motors' electric bus, Kayoola, displayed recently at a stadium in Uganda's capital. From Kampala, Maurice Magorane filed this report narrated by Salem Solomon.
    Video

    Video Silicon Valley: More Than A Place, It's a Culture

    Silicon Valley is a technology powerhouse and a place that companies such as Google, Facebook and Apple call home. It is a region in northern California that stretches from San Francisco to San Jose. But, more than that, it's known for its startup culture. VOA's Elizabeth Lee went inside one company to find out what it's like to work in a startup.
    Video

    Video Immigrant Delegate Marvels at Democratic Process

    It’s been a bitter and divisive election season – but first time Indian-American delegate Dr. Shashi Gupta headed to the Democratic National Convention with a sense of hope. VOA’s Katherine Gypson followed this immigrant with the love of U.S. politics all the way to Philadelphia.
    Video

    Video Philadelphia Uses DNC Spotlight to Profile Historic Role in Founding of United States

    The slogan of the Democratic National Convention now underway in Philadelphia is “Let’s Make History Again” which recognizes the role the city played in the foundation of the United States in the 18th century. As VOA’s Kane Farabaugh reports, local institutions are opening their doors in an effort to capitalize on the convention spotlight to draw visitors, and to offer more than just a history lesson.
    Video

    Video A Life of Fighting Back: Hillary Clinton Shatters Glass Ceiling

    Hillary Clinton made history Thursday, overcoming personal and political setbacks to become the first woman to win the presidential nomination of a major U.S. political party. If she wins in November, she will go from “first lady” to U.S. Senator from New York, to Secretary of State, to “Madam President.” Polls show Clinton is both beloved and despised. White House Correspondent Cindy Saine takes a look at the life of the woman both supporters and detractors agree is a fighter for the ages.
    Video

    Video Dutch Entrepreneurs Turn Rainwater Into Beer

    June has been recorded as one of the wettest months in more than a century in many parts of Europe. To a group of entrepreneurs in Amsterdam the rain came as a blessing, as they used the extra water to brew beer. Serginho Roosblad has more to the story.
    Video

    Video First Time Delegate’s First Day Frustrations

    With thousands of people filling the streets of Philadelphia, Pennsylvania for the 2016 Democratic National Convention, VOA’s Kane Farabaugh narrowed in on one delegate as she made her first trip to a national party convention. It was a day that was anything but routine for this United States military veteran.
    Video

    Video Commerce Thrives on US-Mexico Border

    At the Democratic Convention in Philadelphia this week, the party’s presumptive presidential nominee, Hillary Clinton, is expected to attack proposals made by her opponent, Republican presidential nominee Donald Trump, to build a wall along the U.S.-Mexico border. Last Friday, President Barack Obama hosted his Mexican counterpart, President Enrique Peña Nieto, to underscore the good relations between the two countries. VOA’s Greg Flakus reports from Tucson.
    Video

    Video Film Helps Save Ethiopian Children Thought to be Cursed

    'Omo Child' looks at effort of African man to stop killings of ‘mingi’ children
    Video

    Video London’s Financial Crown at Risk as Rivals Eye Brexit Opportunities

    By most measures, London rivals New York as the only true global financial center. But Britain’s vote to leave the European Union – so-called ‘Brexit’ – means the city could lose its right to sell services tariff-free across the bloc, risking its position as Europe’s financial headquarters. Already some banks have said they may shift operations to the mainland. Henry Ridgwell reports from London.
    Video

    Video Recycling Lifeline for Lebanon’s Last Glassblowers

    In a small Lebanese coastal town, one family is preserving a craft that stretches back millennia. The art of glass blowing was developed by Phoenicians in the region, and the Khalifehs say they are the only ones keeping the skill alive in Lebanon. But despite teaming up with an eco-entrepreneur and receiving an unexpected boost from the country’s recent trash crisis the future remains uncertain. John Owens reports from Sarafand.
    Video

    Video Migrants Continue to Risk Lives Crossing US Border from Mexico

    In his speech Thursday before the Republican National Convention, the party’s presidential candidate, Donald Trump, reiterated his proposal to build a wall along the U.S.-Mexico border if elected. Polls show a large percentage of Americans support better control of the nation's southwestern border, but as VOA’s Greg Flakus reports from the border town of Nogales in the Mexican state of Sonora, the situation faced by people trying to cross the border is already daunting.

    Special Report

    Adrift The Invisible African Diaspora

    World Currencies

    EUR
    USD
    0.9017
    JPY
    USD
    104.72
    GBP
    USD
    0.7594
    CAD
    USD
    1.3160
    INR
    USD
    67.046

    Rates may not be current.