The New York Times is reporting tonight that the federal government is preparing to file suit in the billions of dollars against some of the largest Wall Street banks. The suit alleges that the banks misrepresented the quality of mortgages bundled together as securities, claiming they were secure investments when they were really shaky subprime loans.
The Times says the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, is naming 12 banks in the lawsuit. The banks, many of which received bailout funds from the federal government as part of the Trouble Asset Relief Program, include JP Morgan Chase, Goldman Sachs, Deutsche Bank and Bank of America. The recently proposed $8.5 billion Bank of America settlement with Black Rock, Pimco and the Federal Reserve Bank of New York is also being challenged.
Fannie and Freddie lost over $30 billion during the mortgage crisis.
