Bank of America, Goldman Sachs and JPMorgan all declined to comment. Frank Kelly, a spokesman for Deutsche Bank, said, “We can’t comment on a suit that we haven’t seen and hasn’t been filed yet.”
But privately, financial service industry executives argue that the losses on the mortgage-backed securities were caused by a broader (downturn) in the economy and the housing market, not by how the (mortgages) were originated or packaged into securities. In addition, they contend that investors like A.I.G. as well as Fannie and Freddie were sophisticated and knew the (securities) were not without risk.
Investors fear that if banks are forced to pay out billions of dollars for mortgages that later defaulted, it could sap earnings for years and contribute to further losses across the financial services industry, which has only recently regained its footing.
Bank officials also counter that further legal attacks on them will only delay the recovery in the housing market, which remains (moribund), hurting the broader economy. Other experts warned that a series of adverse settlements costing the banks billions raises other risks, even if suits have legal merit.
The housing finance (agency) was created in 2008 and assigned to oversee the hemorrhaging government-backed mortgage companies, a process known as conservatorship.
“While I believe that F.H.F.A. is acting responsibly in its role as (conservator), I am afraid that we risk pushing these guys off of a (cliff) and we’re going to have to bail out the banks again,” said Tim Rood, who worked at Fannie Mae until 2006 and is now a partner at the Collingwood Group, which advises banks and servicers on housing-related issues.
