Federal Court Rules NSA Phone Data Collection Program Violated the Patriot Act
The Starbucks Prepaid Gift Card App Fraud. What You Need To Know

Court Rules Against 2 Banks On Residential Mortgage Abuses That Led To the 2008 Recession

Nomura Holdings logo The New York Times reported on Monday that a federal court judge:

"... ruled that two banks misled Fannie Mae and Freddie Mac in selling them mortgage bonds that contained numerous errors and misrepresentations... The ruling came in a closely watched case brought by the government against the Japanese bank Nomura Holdings and Royal Bank of Scotland. They were the only two of 18 financial firms that took their case to trial, arguing that it was the housing crash, and not deceptive loan documents, that caused the bonds to collapse."

The cased was decided by Judge Denise L. Cote of Federal District Court in Manhattan and not by a jury:

"... after the government dropped a claim that would have entitled the banks to a jury. After that, legal experts became more pessimistic about the banks’ chances: Judge Cote has a reputation for taking a hard line against the banks. They also expressed surprise that the Nomura and R.B.S. did not settle, though some suspected that as foreign banks, they were less concerned with risking their reputations in the United States. Judge Cote has asked the F.H.F.A. to submit a proposal for damages, which are expected to be about $500 million."

Nomura plans to appeal the decision. The judge's ruling (Adobe PDF) stated:

“This case is complex from almost any angle, but at its core there is a single, simple question. Did defendants accurately describe the home mortgages in the offering documents for the securities they sold that were backed by those mortgages? Following trial, the answer to that question is clear. The offering documents did not correctly describe the mortgage loans. The magnitude of falsity, conservatively measured is enormous. Given the magnitude of the falsity, it is perhaps not surprising that in defending this lawsuit defendants did not opt to prove that the statements in the Offering Documents were truthful. Instead, defendants relied, as they are entitled to do, on a multifaceted attack on plaintiff’s evidence. That attack failed, as did defendants’ sole surviving affirmative defense of loss causation.”

Pause for a moment and let that sink in. The defendant banks' didn't even try prove that their mortgage disclosures were truthful. Instead, they only attacked the evidence presented by the plaintiffs. What does this say? Plenty.

Goldman Sachs and Bank of America settled out of court and paid about $18 billion in penalties. Earlier this year, Bank of America raised prices for its checking account customers by implementing monthly fees.

In August 2014, the Bank of America agreed to a massive settlement with the U.S. Justice Department and several states' attorney generals. The $16.65 billion settlement agreement resolved both federal and state civil investigations into activities by the bank's former and current subsidiaries, including Countrywide Financial Corporation and Merrill Lynch, related to the packaging, marketing, sale, and issuance of residential mortgage-backed securities (RMBS). The bank acquired Merrill Lynch in 2009, and Countrywide in 2008.

In January, the chief executive at JPMorgan bank claimed that banks are under assault from regulators. Really? That's a bunch of malarkey. Stop breaking the law and investigations will stop. Government regulators, and courts, are doing their jobs based upon the facts.


Feed You can follow this conversation by subscribing to the comment feed for this post.

The comments to this entry are closed.