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

Obama: I Will Do 'Everything I Can' to Close Guantanamo

US president says prison continues 'to inspire jihadists and extremists around the world' More

Sierra Leone Educates on Safe Ebola Burials

Also, country is improving at rapid response to isolated outbreaks, but health workers need to be even faster, officials say More

Religion Aside, Christmas Gains Popularity in Communist Vietnam

Increasingly wealthy Vietnamese embrace holiday due to its non-religious glamor, commercial appeal More

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.
US Decision on Cuba Underscores Divisions Among Miami Cubansi
X
Sharon Behn
December 19, 2014 9:34 PM
For decades, older, more conservative Cubans have been gathering at Café Versailles on the corner of Calle Ocho to eat Cuban food and talk politics. After hearing of President Barack Obama’s decision, a number of them gathered in front of the café with posters to protest. VOA's Sharon Behn reports on the situation.
Video

Video US Decision on Cuba Underscores Divisions Among Miami Cubans

For decades, older, more conservative Cubans have been gathering at Café Versailles on the corner of Calle Ocho to eat Cuban food and talk politics. After hearing of President Barack Obama’s decision, a number of them gathered in front of the café with posters to protest. VOA's Sharon Behn reports on the situation.
Video

Video Three Cities Bid for Future Obama Presidential Library

President Barack Obama still has two years left in his term in office, but the effort to establish his post-presidential library is already underway. The bid for the Obama Presidential Library is down to four locations in three states -- New York, Hawaii, and Illinois. As VOA’s Kane Farabaugh reports, each of them played an important part in the president’s life before he reached the White House.
Video

Video Cuba Deal is Major Victory for Pope’s Diplomatic Initiatives

Pope Francis played a key role in brokering the US-Cuba deal that was made public earlier this week. It is the most stunning success so far in a series of peacemaking efforts by the pontiff. VOA religion reporter Jerome Socolovsky has more.
Video

Video Fears of More Political Gridlock in 2015

2014 proved to be a difficult year politically for President Barack Obama and a very good year for the U.S. Republican Party. Republican gains in the November midterm elections gave them control of the Senate and House of Representatives for the next two years -- setting the stage for more confrontation and gridlock in the final two years of the Obama presidency. VOA National Correspondent Jim Malone has a preview from Washington.
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. VOA reporter Ayaz Gul visited the devastated school and attended the funeral of the principal who courageously tried to save her students from the deadly attack.
Video

Video Nigerians Fleeing Boko Haram Languish in Camp Near Capital

In its five-year effort to impose Islamic law in northeastern Nigeria, the Boko Haram extremist group has killed thousands of people and forced hundreds of thousands to flee. Some of those who ran for their lives now live in squalor on the edges of the capital, Abuja. Chris Stein reports for VOA.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.

All About America

AppleAndroid

World Currencies

EUR
USD
0.8143
JPY
USD
119.23
GBP
USD
0.6390
CAD
USD
1.1596
INR
USD
63.304

Rates may not be current.