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VOL. 126 | NO. 173 | Tuesday, September 6, 2011

Feds Sue 17 Major U.S. Banks, including First Tenn. Parent

By Andy Meek

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The federal agency that oversees the government-sponsored mortgage entities Fannie Mae and Freddie Mac has filed suit seeking billions of dollars in compensation from several major U.S. banks, including the parent company of First Tennessee Bank.

According to a release posted on the Website of the Federal Housing Finance Agency, the suits allege violations of federal securities laws and common law in the sale of residential private-label mortgage-backed securities to the two mortgage entities.

First Horizon officials had not yet seen the suit Friday afternoon, but a spokesman said the company intended to vigorously defend itself.

The list of defendants includes almost every major financial player in the country.

In addition to Memphis-based First Horizon National Corp., complaints were filed against Ally Financial Inc.; Bank of America Corp.; Barclays Bank PLC; Citigroup Inc.; Countrywide Financial Corp.; Credit Suisse Holdings (USA) Inc.; Deutsche Bank AG; General Electric Co.; Goldman Sachs & Co.; HSBC North America Holdings Inc; JPMorgan Chase & Co.; Merrill Lynch & Co./First Franklin Financial Corp.; Morgan Stanley; Nomura Holding America Inc; Royal Bank of Scotland Group PLC; and Societe Generale.

“These complaints were filed in federal or state court in New York or the federal court in Connecticut,” the federal agency’s release reads. “The complaints seek damages and civil penalties under the Securities Act of 1933, similar in content to the complaint FHFA filed against UBS Americas, Inc. on July 27, 2011. In addition, each complaint seeks compensatory damages for negligent misrepresentation. Certain complaints also allege state securities law violations or common law fraud.”

The agency went on to note its allegation that some part of the losses Fannie Mae and Freddie Mac absorbed on private-label mortgage-backed securities are attributable to misrepresentations by the defendants.

“Based on our review, FHFA alleges that the loans had different and more risky characteristics than the descriptions contained in the marketing and sales materials provided to the Enterprises for those securities,” the agency’s release states.

RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 91 158 16,219
MORTGAGES 98 179 18,735
FORECLOSURE NOTICES 13 36 2,497
BUILDING PERMITS 136 349 33,738
BANKRUPTCIES 63 115 10,429
BUSINESS LICENSES 30 47 5,350
UTILITY CONNECTIONS 24 53 6,326
MARRIAGE LICENSES 19 52 3,563