Judge Rules That 2 Banks Misled Fannie, Freddie in Mortgage Crisis
A federal judge yesterday ruled that the Royal Bank of Scotland and Nomura Holdings had misled Fannie Mae and Freddie Mac in the sale of junk mortgages in the lead-up to the 2008 market crash. They were the only two of eighteen banks (including Goldman Sachs and Bank of America) involved in government suits that refused to settle. The other firms involved avoided trial by paying a total $18B in fines.
"The magnitude of falsity, conservatively measured, is enormous,” wrote Judge Denise Cote of Federal District Court in Manhattan. The major victory for regulators came thanks in large part to the Federal Housing Finance Agency, which was created to oversee Washington-backed mortgage providers Fannie and Freddie following their 2008 taxpayer bailout. Damages are expected to reach about $500M. A Nomura spokesman said the bank planned to appeal Judge Cote's decision. [NYT]