Bank Shares Fall After Reports of Pending Federal Lawsuit
The federal government is prepared to file a multi-billion dollar lawsuit against a dozen major U.S. banks for misrepresenting the quality of their mortgage-backed securities, according to a report Thursday night in the New York Times.
Nearly every major U.S. bank, including JPMorgan Chase, Goldman Sachs, and beleaguered Bank of America, will be named in the suit, which seeks reimbursement for the riskier securities. These were backed by highly unstable subprime loans that led, in large part, to the 2008 financial meltdown.
The Financial Times says the biggest loser of all could be the already embattled Bank of America, which recently announced plans to slash 10,000 jobs.
Forbes also reported shares of the other banks believed to be named in the pending lawsuit have also taken a hit.
“Among the banks named in the reports, JPMorgan Chase & Co. stock lost $1.30, or 3.4 percent, to $35. Goldman Sachs Group Inc. gave up $5.42, or 4.8 percent, to $106.74. Citigroup Inc. dropped $1.14, or 3.8 percent, to $28.86. Also losing ground was Morgan Stanley, down 72 cents, or 4.2 percent, at $16.21.”
The lawsuit is expected to be filed Friday or on Tuesday morning, after the holiday weekend.