Credit Suisse Group is being sued by the New York attorney general over allegations of deceiving investors in mortgage-backed securities.
NY attorney general Eric T. Schneiderman claims that Credit Suisse misrepresented the quality of loans underlying the mortgage-backed securities, which it financed and underwrote from 2006 to 2007. The action cost customers more than $11 billion.
The Zurich-based bank did not thoroughly check the loans and disregarded the flaws it uncovered from its inadequate review, according to the lawsuit. It was also state in the lawsuit that Credit Suisse did not undertake due diligence it promised. The case was filed in accordance to the Martin Act, a securities fraud statute.
The suit seeks restitution, damages, and other relief for investors. It is the most recent move of a group created by President Obama to pursue misconducts that contributed to the financial crisis in 2008.
Mr. Schneiderman, the group’s co-chairman, considered the action as another vital step in their efforts to make financial institutions liable for the wrong doings that resulted in most likely the worst financial meltdown of the century.
Last week, Credit Suisse settled a federal civil case over an allegation that it tricked investors into buying risky mortgage bonds prior to the financial crisis. The bank agreed to pay $120 million to resolve the lawsuit. JPMorgan Chase also agreed to pay about $300 million in a similar lawsuit. The banks resolved the cases without acknowledging wrongdoings.
Mr. Schneiderman also filed a case against JPMorgan in October over mortgage-backed securities bundled and sold by Bear Stearns.
The lawsuits filed by Mr. Schneiderman’s group are seen as a final effort of the Obama administration to make banks and others liable for their unlawful activities in the mortgage industry.
Many banks are being sued by insurers, pension funds, and others for allegedly misinterpreting the quality of loans underlying mortgage-backed securities.
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