New YorkAttorney General Eric Schneiderman is on a roll in his pursuit of wrongdoers in the financial crisis.
His latest comes in a lawsuit filed against Credit Suisse in which he accuses the Swiss bank of misleading investors over the quality of residential mortgage-backed securities. The deception resulted in losses to investors of some $11.2 billion, according to the suit.
“This lawsuit against Credit Suisse marks another significant step in our efforts to hold financial institutions accountable for the misconduct that led to the worst financial crisis in nearly a century,” said Attorney General Schneiderman in a statement.
Credit Suisse is fighting back. The bank provided this statement today: "We firmly reject this complaint which recycles baseless claims from private lawsuits and uses an inaccurate and exaggerated number. We look forward to presenting our defense in court."
According to the complaint, the defendants led investors to believe that the loans in the underlying RMBS were evaluated and monitored to ensure quality of the investment. That due diligence did not take place, and instead, defendants were more concerned with getting high volumes of loans from mortgage originators who were rewarded by Credit Suisse based on loan volume, the complaint says.
Credit Suisse encouraged the mortgage originators to "continue delivering...crap according the complaint which cites e-mails between defendants and mortgage originators.
The AG's suit comes just weeks after a similar lawsuit was filed against JPMorgan Chase over mortgage-backed securities packaged and sold by Bear Stearns.
The suits come out of the Residential Mortgage-Backed Securities Working Group, a state-federal task force created by President Obama earlier this year to investigate those responsible for misconduct contributing to the financial crisis through the pooling and sale of residential mortgage-backed securities. AG Schneiderman is co-chair of the group.
Among the investor victims in the Credit Suisse case are Fannie Mae and Freddie Mac, according to the statement.
"As victims, Fannie Mae and Freddie Mac have sustained significant losses, which to date have been borne by taxpayers. This lawsuit sends the clear message that reckless lending practices will not be tolerated," said FHFA Inspector General Steve Linick who oversees the two agencies.
