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

Video Debt-ridden Refugees Await Onslaught of Lebanese Winter

Aid agencies are attempting to reduce potentially devastating consequences of freezing conditions and snowstorms that killed eight last year, including three Syrian refugees

Photogallery Belgian Security Measures Foreshadow New Normal for Europe

Rising threat of terrorism, disaffected Muslim populations and open borders, along with refugee, migrant crisis, are creating perfect storm for Europe, which some analysts fear continent is ill-suited to weather

Americans Think About Strange Stuff at Thanksgiving

Tattoos, hookah bars and doughnuts? Google Maps lays out what people really have on their minds during the holiday

This forum has been closed.
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.
After Paris Attacks, France Steps Up Fight Against ISi
November 24, 2015 3:04 AM
The November 13 Paris attacks have drawn increased attention to Syria, where many of the suspected perpetrators are said to have received training. French President Francois Hollande is working to build a broad international coalition to defeat Islamic State in Syria and in Iraq. Zlatica Hoke reports.

Video After Paris Attacks, France Steps Up Fight Against IS

The November 13 Paris attacks have drawn increased attention to Syria, where many of the suspected perpetrators are said to have received training. French President Francois Hollande is working to build a broad international coalition to defeat Islamic State in Syria and in Iraq. Zlatica Hoke reports.

Video US, Cambodian Navies Pair Up in Gulf of Thailand

The U.S. Navy has deployed one of its newest and most advanced ships to Cambodia to conduct joint training drills in the Gulf of Thailand. Riding hull-to-hull with Cambodian ships, the seamen of the USS Fort Worth are executing joint-training drills that will help build relations in Southeast Asia. David Boyle reports for VOA from Preah Sihanouk province.

Video Americans Sharpen Focus on Terrorism

Washington will be quieter than usual this week due to the Thanksgiving holiday, even as Americans across the nation register heightened concerns over possible terrorist threats. VOA’s Michael Bowman reports new polling data from ABC News and the Washington Post newspaper show an electorate increasingly focused on security issues after the deadly Islamic State attacks in Paris.

Video World Leaders Head to Paris for Climate Deal

Heads of state from nearly 80 countries are heading to Paris (November 30-December 11) to craft a global climate change agreement. The new accord will replace the Kyoto Protocol on Climate Change that expired in 2012.

Video Uncertain Future for Syrian Refugee Resettlement in Illinois

For the trickle of Syrian refugees finding new homes in the Midwest city of Chicago, the call to end resettlement in many U.S. states is adding another dimension to their long journey fleeing war. Organizations working to help them integrate say the backlash since the Paris attacks is both harming and helping their efforts to provide refugees sanctuary. VOA's Kane Farabaugh reports.

Video Creating Physical Virtual Reality With Tiny Drones

As many computer gamers know, virtual reality is a three-dimensional picture, projected inside special googles. It can fool your brain into thinking the computer world is the real world. But If you try to touch it, it’s not there. Now Canadian researchers say it may be possible to create a physical virtual reality using tiny drones. VOA’s George Putic reports.

Video New American Indian Village Takes Visitors Back in Time

There is precious little opportunity to experience what life was like in the United States before its colonization by European settlers. Now, an American Indian village built in a park outside Washington is taking visitors back in time to experience the way of life of America's indigenous people. Carol Pearson narrates this report from VOA's June Soh.

Video Even With Hometown Liberated, Yazidi Refugees Fear Return

While the northern Iraqi town of Sinjar has been liberated from Islamic State forces, it's not clear whether Yazidi residents who fled the militants will now return home. VOA’s Mahmut Bozarslan talked with Yazidis, a religious and ethnic minority, at a Turkish refugee camp in Diyarbakır. Robert Raffaele narrates his report.

Video Nairobi Tailors Make Pope Francis’ Vestments

To ensure the pope is properly attired during his visit, the Kenya Conference of Catholic Bishops asked the Dolly Craft Sewing Project in the Nairobi slum of Kangemi to make the pope's vestments, the garments he will wear during the various ceremonies. Jill Craig reports.

Video Cross-Border Terrorism Puts Europe’s Passport-Free Travel in Doubt

The fallout from the Islamic State terror attacks in Paris has put the future of Europe’s passport-free travel area, known as the "Schengen Zone," in doubt. Several of the perpetrators were known to intelligence agencies, but were not intercepted. Henry Ridgwell reports from London European ministers are to hold an emergency meeting Friday in Brussels to look at ways of improving security.

Video El Niño Brings Unexpected Fish From Mexico to California

Fish in an unexpected spectrum of sizes, shapes and colors are moving north, through El Niño's warm currents from Mexican waters to the Pacific Ocean off California’s coast. El Nino is the periodic warming of the eastern and central Pacific Ocean. As Faiza Elmasry tells us, this phenomenon thrills scientists and gives anglers the chance of a once-in-a-lifetime big catch. Faith Lapidus narrates.

Video Terrorism in Many Forms Continues to Plague Africa

While the world's attention is on Paris in the wake of Friday night's deadly attacks, terrorism from various sides remains a looming threat in many African countries. Nigerian cities have been targeted this week by attacks many believe were staged by the violent Islamist group Boko Haram. In addition, residents in many regions are forced to flee their homes as they are terrorized by armed militias. Zlatica Hoke reports.

Video Study: Underage Marriage Rate Higher for Females in Pakistan

While attitudes about the societal role of females in Pakistan are evolving, research by child advocacy group Plan International suggests that underage marriage of girls remains a particularly big issue in the country. VOA’s Ayesha Tanzeem reports how such marriages leads to further social problems.

VOA Blogs

World Currencies


Rates may not be current.