FDIC Sues Big Banks Over Mortgage Securities

May 23, 2012

The government has sued several big banks over toxic mortgage securities they issued that were bought by two small Illinois banks which failed in May 2009.

The Federal Deposit Insurance Corp., which seized the two banks when they failed, filed the civil lawsuits last Friday in federal court. The agency named as defendants banks including Citigroup, JPMorgan Chase, Bank of America, Credit Suisse, Deutsche Bank, Royal Bank of Scotland, UBS and HSBC.

The FDIC says the banks made false statements and deceived investors about the risks in the securities backed by pools of home mortgages. The failures of the two Illinois banks, Strategic Capital Bank and Citizens National Bank, cost the deposit insurance fund $169 million and $37.2 million, respectively. The FDIC seeks a total of about $92 million in damages.

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