Schneiderman Takes Aim: What Banks Will Be In His Crosshairs?
New York Attorney General Eric Schneiderman, who sued JPMorgan Chase (NYSE:JPM) earlier this week for allegedly defrauding investors, will investigate mortgage securities practices of at least a dozen other financial institutions. Twelve banks have agreed to suspend a deadline for Schneiderman to launch claims, Bloomberg said. JPMorgan is one of the 12 banks, but the names of the other 11 are still under wraps. The tolling agreements put on hold a six-year statute of limitations and allow Schneiderman to bring fraud claims for practices going back to 2006.
Schneiderman heads a taskforce, which also includes the U.S. Securities and Exchange Commission and the U.S. Justice Department, to investigate possible misconduct in the process of converting mortgage loans into securities around the time of the financial crisis. The group took its first legal action against JPMorgan unit Bear Stearns, alleging it deceived investors about defective loans related to mortgage bonds.
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“We do expect this to be a matter of very significant liability, and there are others to come that will also reflect the same quantum of damages,” Schneiderman said to Bloomberg Television about that case. “We’re looking at tens of billions of dollars, not just by one institution, but by quite a few.”
Washington Mutual, also a JPMorgan unit now, and Bank of America’s (NYSE:BAC) Countrywide Financial unit were also among the top five issuers of mortgage securities in 2006, along with Bear Sterns.
Separately, the National Credit Union Administration filed a lawsuit against Credit Suisse’s (NYSE:CS) securities unit on Thursday, accusing it of selling faulty mortgage-backed securities to three credit unions. All three credit unions eventually collapsed.
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