For big banks, maybe it's reckoning time
Mortgage Crisis Presents a New Reckoning to Banks
By JESSICA SILVER-GREENBERG, NYT
The nation’s largest banks are facing a fresh torrent of lawsuits asserting that they sold shoddy mortgage securities that imploded during the financial crisis, potentially adding significantly to the tens of billions of dollars the banks have already paid to settle other cases.
Regulators, prosecutors, investors and insurers have filed dozens of new claims against Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and others, related to more than $1 trillion worth of securities backed by residential mortgages.
Estimates of potential costs from these cases vary widely, but some in the banking industry fear they could reach $300 billion if the institutions lose all of the litigation. Depending on the final price tag, the costs could lower profits and slow the economic recovery by weakening the banks’ ability to lend just as the housing market is showing signs of life.
The banks are battling on three fronts: with prosecutors who accuse them of fraud, with regulators who claim that they duped investors into buying bad mortgage securities, and with investors seeking to force them to buy back the soured loans.
(More here.)
The nation’s largest banks are facing a fresh torrent of lawsuits asserting that they sold shoddy mortgage securities that imploded during the financial crisis, potentially adding significantly to the tens of billions of dollars the banks have already paid to settle other cases.
Regulators, prosecutors, investors and insurers have filed dozens of new claims against Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and others, related to more than $1 trillion worth of securities backed by residential mortgages.
Estimates of potential costs from these cases vary widely, but some in the banking industry fear they could reach $300 billion if the institutions lose all of the litigation. Depending on the final price tag, the costs could lower profits and slow the economic recovery by weakening the banks’ ability to lend just as the housing market is showing signs of life.
The banks are battling on three fronts: with prosecutors who accuse them of fraud, with regulators who claim that they duped investors into buying bad mortgage securities, and with investors seeking to force them to buy back the soured loans.
(More here.)
Powered by Blogger
3 Comments:
blaming the banks for the mortgage crisis is like blaming the pusher for drug proliferation.
We all know the seeds of the crisis were sown 20 years ago with Henry Cisneros at HUD (and later Amdrew Cuomo) that loosened lending standards (or else branding banks as 'racist') and pushed Freddie and Fannie and their implicit tax-payer guarantees in to the sub-prime mortage market of CDOs and MBSs. Even the New York Times reported on the possible disastrous outcomes of federal government meddling in the lending practices of banks. Once Freddie and Fannie entered the fray, there were thousands of fly-by-night lenders that popped up all over the place to write mortgages for homes, cars, boats, you name it. And then sell those mortgages to Freddie and Fannie while keeping the fees. Indeed, the building where I worked from 1999 to 2006 remodeled its first floor so that these groups could teach people how to write all sorts of loans, keep the fees and sell the asset to financial firm or Freddie / Fannie. I'll never forget seeing the signs in the main floor lobby about weekly meetings for training on how to be a mortgage broker. Even since the 2008 financial crisis, there have been no more 'mortgage writing' training sessions in that building.
Blaming the banks is just too easy.
The real culprit has always been the federal government. The government is the drug manufacturer, the banks are the pusher, and homebuyer is the junkie. I guess it only makes sense to blame the banks since drug dealers go to jail and drug kingpens get off scott free.
This might be a good start to the process of moving away from crony capitalism. Along the same lines we should punish the politicians who; pushed for the Community Reinvestment Act (let’s force bankers to give loans to people who can’t pay them back), those who removed the Steagall Glass Act (let’s let the bankers play investors with other peoples money) and lastly, those who thought Freddie and Fannie were great ideas and financially sound right up until,… they weren’t.
The great irony in your comments Tom is that all three - CRA, Glass-Steagall repeal and Freddie/Fannie - were all pushed, coddled, cultivated and carried out by Democrats.
CRA - Carter, Clinton, Cisneros, Cuomo.
Glass-Steagal - repealed under Clinton at the urging of Tresury Secretary Robert Rubin (who would later head up Citi after the mega-mergers he helped set up after Glass-Steagal was repealed). The other Wall Street firms just followed suit using borrowed money at low interest rates and mingling those with the banks they could purchase without G-S oversight to enter the MBS/CDO markets reaping huge fees while racking up leverage in the 40:1 range. If you look at all the CEOs of all the big wall Street firms - Bear, Merrill, Goldman, Lehman, Citi, Morgan and the others - ALL of their CEOs were Democrats. ALL OF THEM!! Stan O'Neal, Jimmy Cayne, Vikram Pandit, Rubin, John Meriweather and others.
AIG and Countrywide who insured Wall Street debt with credit default swaps were also run by Democrats - Countrywide's infamous 'friends of Angelo' Mozillo comes to mind. No secret that Mozillo was a lifelong Democrat.
Freddie/Fannie - Dodd, Frank, Raines, Clinton, Cuomo
There wasn't a Republican within light years of the shenanigans undertook with these three circumstances. Not one.
Post a Comment
<< Home