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NEW YORK — In a sweeping move, the government on Friday
sued 17 financial firms, including the largest U.S. banks, for
selling Fannie Mae and Freddie Mac billions of dollars worth of
mortgage-backed securities that turned toxic when the housing
market collapsed.


      Among the 17 targeted by the lawsuits were Bank of America
Corp., Citigroup Inc., JP Morgan Chase & Co., Goldman Sachs.


      The lawsuits were filed Friday by the Federal Housing Finance
Agency which oversees Fannie and Freddie, the two agencies that buy
mortgages loans and mortgage securities issued by the lenders.
      The total price tag for the securities bought by Fannie and
Freddie affected by the lawsuits: $196 billion.


      The government didn't provide a dollar amount of how much it
seeks in damages. It said that it wants to have the purchases of
the securities canceled, be compensated for lost principal and
interest payments as well as attorney fees and costs. The lawsuits
allege the financial firms broke federal and state laws with the
sales.


      Home mortgage-backed securities were risky investments that
collapsed after the real-estate bust and helped fuel the financial
crisis in late 2008.


      In the lawsuits that were filed in federal or state court in New
York and the federal court in Connecticut, the government said the
securities were sold with registration statements and prospectuses
that "contained materially false or misleading statements and
omissions."


      The Federal agency said the banks and mortgage lenders also
falsely represented that the mortgage loans in the securities
complied with underwriting guidelines and standards. They also
included representations "that significantly overstated the
ability of the borrower to repay their mortgage loans."


      The 17 institutions are Ally Financial Inc., formerly known GMAC
LLC, Bank of America Corp., Barclays Bank PLC, Citigroup Inc.,
Countrywide Financial Corp., Credit Suisse Holdings Inc., Deutsche
Bank AG, First Horizon National Corp., General Electric Co.,
Goldman Sachs & Co., HSBC North America Holdings Inc., JPMorgan
Chase & Co., Merrill Lynch & Co. and its unit First Franklin
Financial Corp., Morgan Stanley, Nomura Holding America Inc., The
Royal Bank of Scotland Group PLC, and Societe Generale.

Gallery

The government sued 17 financial firms, including the largest U.S. banks, for selling billions of dollars worth of mortgage-backed securities that turned toxic.

Feds sue biggest US banks over risky mortgages

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