The government’s “Federal Housing Finance Authority” is going to sue the big banks that sold Fannie Mae and Freddie Mac junk securities that contributed to the collapse of the mortgage industry during the Bush Administration.
Fannie and Freddie – and the US taxpayer – lost more than $30 billion from bad deals like these.
Other suits are ongoing or contemplated. The 50 state attorneys general are seeking $20 billion from the banks, and even AIG – whose own performance has been scandalous – has filed a $10 billion suit against Bank of America, accusing the bank and its Countrywide Financial and Merrill Lynch units of misrepresenting the quality of mortgages that backed the securities A.I.G. bought.
It’s fair to wonder if the Administration will blink when the banks and their shills in Washington push back.