Solicitor.info Blog

As if things couldn’t get any worse for the housing crisis in the United States, news came Friday that the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, is suing 17 banks. The lawsuits are based on accusations that the banks, including Goldman Sachs, Citi and JP Morgan, violated federal securities laws when it made private label mortgage backed securities for homes across the country. The total lawsuit adds up to nearly $200 billion U.S. dollars. Bank of America could find themselves facing a $10 billion hit.

Many Americans have grown weary of the financial outlook and the U.S. government’s lack of focus on other more pressing matters, while others have criticized the Obama Administration’s lack of attention paid to the banks. The collective bank body has benefited from a $700 billion bailout effort that came after Lehman Brothers set the wheels in motion in 2008.

As word came down late in the day on Friday, there were immediate repercussions, including a near-250 point drop. Bank of America’s shares fell more than 8% and other banks had similar losses.

Further complicating matters is the belief by many analysts that it will take years to resolve these lawsuits – and a lot of taxpayer money. As Jaret Seiberg, a policy analyst with MF Global stated, “There’s no much incentive for either side to settle”.

The government’s not the only body suing the banks, though. Private investors have also kept their legal teams busy with their own lawsuits. Regardless of the outcome, the fact is no one wins and certainly, the American taxpayer is the one that has even more to lose. Even as the lawsuits were announced, many banks were already prepared with their own statements that criticized the government and said it should have know the securities had no shortage of risks and that the “sophisticated investors” should know the losses are due to the devastating housing crash and not due to any illegal activities.

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