Posted by Karl Denninger
I’m sure you all remember how clearly I have stated that I believe that mortgage origination, securities packaging and dealing was fraudulent during the housing bubble, right?
I’ve been saying it now for three years – that credit quality was flatly ignored, appraisals were intentionally rigged and borrower lies were intentionally ignored.
Well now FHLB Seattle has gone and done what no criminal prosecutor has had the balls to do – it has sued nine securities dealers. Among them are Credit Suisse, Deutsche Bank, JP Morgan and Bank of America. What is FHLB Seattle alleging in its suit?
“The bank’s complaints allege that the dealers made untrue or misleading statements about the characteristics of the mortgage loans underlying the securities,” according to the statement.
The dealers made false statements or omitted important information about the loans that backed the securities they sold, the bank alleged in its complaints. The bank claims the dealers failed to disclose that appraisals were biased upward on properties that secured mortgage loans, that underwriting guidelines were ignored by originators and that loan to property value ratios were exaggerated.
Yep. Exactly what I have said for the last three years, and what should, in my opinion, had long since led to criminal charges for alleged fraudulent conduct.
This is the second such suit – as I reported earlier the same bank and the FHLB Pittsburgh bank sued Goldman, JP Morgan and Morgan Stanley last year.
The economic mess we are in will not be resolved until these securities are recognized on bank balance sheets at their true underlying value and, where appropriate, those who falsified credit quality and other information about these securities during their packaging and sale are held to account for what they have done.
Now exactly where are all these securities and at what marks are they being held in the banks across our land?
That’s a question we all deserve an answer to.