On Friday afternoon most people tried to duck out of work to get an early start on the weekend. Not the Federal Housing Finance Administration, they announced a massive lawsuit encompassing some 17 Wall Street banks.
The lawsuit is over mortgage backed securities that the banks had sold to Fannie Mae and Freddie Mac. These MBS' obviously went pretty sour when the housing bubble burst and the FHFA is looking to point fingers at that banks saying that they made "false and/or misleading statements". The banks are using the same defense as always, saying :
Fannie and Freddie were sophisticated investors who should have known the securities were not without risk and that the losses were caused not by fraud or misrepresentation but by underlying difficulties in the housing market.
Some of the amounts have not been specified by the FHFA since they are seeking "unspecified punitive damages" but it is clear that this is the beginning of a long legal process for both sides. As lawsuits continue to hammer banks what do you guys think will happen?. Will lawsuits like this persist until we see the end of the big bank? Or will the wall street big bank model continue to hold its ground for years to come?
It will be very difficult to kill the big bank model without very restrictive legislation. Everyone who is doom and gloom on the current global banking model is forgetting about the simple fact that led to it's creation - if I have the balance sheet to make loans alongside my advisory capability, I am going to win mandates. Pure and simple. It will be very difficult for a new generation of boutique I-banks to go toe to toe with the real players, simply because companies will generally prefer to work with banks that can offer financing. You would pretty much need to bring back Glass-Steagall to eliminate the model.
Even if you sue the existing banks into bankruptcy, the assets still exist, a new generation of banks will buy them and drastically expand their balance sheets, and you'll have the same system with different logos.
The banks might shrink though, but that's a different story.
in b4 bank of america is a good buy
Does it really matter? With all the cheap funding from the Fed since '08 and guaranteed until 2013, the banks got plenty of cheap money that they used to profit themselves and not specifically open up credit markets (and who can blame them- dumb shits at the fed think its bank's responsibility to build a healthy economy). Once this lawsuit is settled, the actual amount will be only a fraction of this (and if its too much, then the gov. will find some other way to recapitalize the banks further).
Wall Street will be rolling in money until (A) the federal reserve system changes or (B) the entire US economy is kaput.
Step 1: Pressure banks to make loans to unqualified investors Step 2: Bail out the banks that made loans to unqualified investors Step 3: Sue the banks that were bailed out that made loans to unqualified investors Step 4: ??? Step 5: Profit
Peter Schiff did a great job of highlighting the hilarity of this nonsense.
The lawsuit doesn't have teeth, but it is still transferring money from the big banks to big law. Wonder why
i dont get their logic. They bailed several banks out and they are now suing their ass? wtf? They are just helping the short term traders to make a ton of money and in the end the lawsuit won't go anywhere but a selttlement
perhaps to give the perception (to the public) that justice is being served....re-election time is around the corner
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