Federal Government Turns on the Banks It Bailed Out

By:  Charles Scaliger
09/19/2011
       
Federal Government Turns on the Banks It Bailed Out

After spending hundreds of billions to bail them out, the federal government is now turning on the big banks it once protected. Earlier this month, the Federal Housing Finance Agency launched a broad legal assault on 17 major banks, claiming the banks misled Fannie Mae and Freddie Mac in misrepresenting the quality of mortgage-backed securities. The FHFA’s lawsuit is a new attempt on the part of the federal government to recoup from big banks some of the taxpayer money lost during the financial crisis. Banks named in the action include Bank of America, J.P. Morgan Chase, Goldman Sachs, Morgan Stanley, Citigroup, and Deutsche Bank.

In a separate action, the feds went on a second offensive against Goldman Sachs, with the Federal Reserve — newly empowered as a financial regulatory and enforcement body, besides being a central bank — initiating legal action against the investment bank, claiming Goldman had exhibited “a pattern of misconduct and negligence” in its issuing of mortgage-backed loans.

After spending hundreds of billions to bail them out, the federal government is now turning on the big banks it once protected. Earlier this month, the Federal Housing Finance Agency launched a broad legal assault on 17 major banks, claiming the banks misled Fannie Mae and Freddie Mac in misrepresenting the quality of mortgage-backed securities. The FHFA’s lawsuit is a new attempt on the part of the federal government to recoup from big banks some of the taxpayer money lost during the financial crisis. Banks named in the action include Bank of America, J.P. Morgan Chase, Goldman Sachs, Morgan Stanley, Citigroup, and Deutsche Bank.

In a separate action, the feds went on a second offensive against Goldman Sachs, with the Federal Reserve — newly empowered as a financial regulatory and enforcement body, besides being a central bank — initiating legal action against the investment bank, claiming Goldman had exhibited “a pattern of misconduct and negligence” in its issuing of mortgage-backed loans.

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