“It’s not about one deal or five deals or ten deals,” New York Attorney General Eric Schneiderman said in a conference call with reporters Tuesday. “It’s about their entire course of conduct in the residential mortgage-backed-securities business.”
New York Attorney General Eric Schneiderman filed a lawsuit Tuesday against Credit Suisse, alleging that the bank repeatedly defrauded investors in sales of mortgage-backed-securities.
The suit marks the latest effort by government officials to hold Wall Street firms accountable in connection with the financial crisis. Schneiderman co-chairs a task force announced earlier this year by President Obama to address the issue, with a specific focus on mortgage-backed-securities.
These securities, which derive their cash flows from pools of mortgages, were a central part of the crisis, prompting huge losses for banks and investors when the housing market went bust. Schneiderman alleges that in 2006 and 2007, Credit Suisse sponsored mortgage-backed-securities worth $93.8 billion that, as of August, had suffered $11.2 billion in losses.
The lawsuit seeks damages to recoup these losses, as well as additional relief, meaning Credit Suisse (CS) could be on the hook for a massive penalty compared with most crisis-related cases.
Last week, Credit Suisse paid $120 million to settle allegations from the Securities and Exchange Commission that it failed to disclose its practice of collecting cash settlements from mortgage originators for loans that went bad without passing on the proceeds to the investors who bought the related securities. The bank was also accused making misstatements in its SEC filings about when it would repurchase problem loans from investors.
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