The Federal Deposit Insurance Corp. (FDIC) has filed three
separate lawsuits against major banks over the alleged sale of $5.4
billion worth of risky mortgage-backed securities (MBS) to the
failed Guaranty Bank. The FDIC, in aggregate, is seeking more than
$2.14 billion in damages from various units of the banks.
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Guaranty Bank, based in Austin, Texas failed in August 2009 and was
acquired by Birmingham-based BBVA Compass, a wing of
Banco Bilbao Vizcaya Argentaria, S.A.
). At that time, Guaranty Bank operated 105 branches in Texas and
59 branches in California.
The FDIC has accused the lenders of presenting distorted facts
related to the MBS they sold to Guaranty Bank. Moreover, the FDIC
charged the banks of not disclosing authentic facts related to the
quality of the underlying assets while selling risky MBS.
One of the litigation filed by the FDIC seeks nearly $900 million
in damages for approximately $1.8 billion worth of MBS sold to
Guaranty Bank. The defendants in this case include units of Ally
The Goldman Sachs Group Inc.
Deutsche Bank AG
JPMorgan Chase & Co.
), among others.
In the second lawsuit, the FDIC has charged the units of financial
institutions that include
Bank of America Corporation
), JPMorgan and
The Royal Bank of Scotland Group plc
) of selling $2.1 billion of MBS to Guaranty Bank. The regulator is
seeking about $677.4 million in damages.
For the third and last case, the FDIC is demanding roughly $559.7
million from the units of banks that comprise Bank of America,
Deutsche Bank and Goldman Sachs, among others. The lenders had sold
MBS worth $1.5 billion to Guaranty Bank.
These lawsuits are almost identical to the one that was filed by
the FDIC earlier this month. The regulator charged the units of
Wall Street biggies like JPMorgan, Bank of America,
Wells Fargo & Company
), Deutsche Bank,
Credit Suisse Group
HSBC Holdings plc
), Ally Financial Inc. and Royal Bank of Scotland, among others of
selling nearly $388 million of risky MBS to the failed Colonial
The FDIC's action comes as a major blow to the big banks that are
already facing numerous litigations related to the sale of risky
MBS. However, the investors and other financial institutions which
suffered as a result of these faulty practices are expected to get