Mortgage Backed Securities (MBS) Continue To Haunt Major Banks
Citigroup Incorporated (C) and Bank of America (BAC) have announced that they have been sued by the Federal Home Loan Bank of Boston (FHLB) for misstatements and omissions relating to mortgage backed securities (MBS), as reported by the Dow Jones Newswire. There have been others named in suits by the FHLB, including Ally Financial, Capital One, Wells Fargo, Morgan Stanley and McGraw Hill Company, among others, for losses on its $5.8 billion investment in mortgage backed securities (MBS). The FHLB is seeking various forms of relief including rescission, compensatory damages, recovery of purchase consideration plus interest, attorneys’ fees and expenses.
William Fitzpatrick and Michael Brautigam, two Citigroup shareholders filed suit against former and current directors alleging that Citgroup was damaged as a result of the breaches of fiduciary duties by the directors. Apparently the suit is an attempt to force the directors to take steps to avoid a repeat of the damaging events of the financial crisis, including botched foreclosure proceedings, oversights and controls.