Federal Home Loan Bank of Chicago sues B of A, others
The Federal Home Loan Bank of Chicago has sued several of the nation’s largest banks, including its biggest shareholder, Bank of America Corp., alleging that their failure to disclose lax mortgage underwriting standards led the Home Loan Bank to suffer losses after purchasing poor-quality mortgage-backed securities from them. In addition to Bank of America, defendants include Citigroup Inc., Goldman Sachs Group Inc. and Wells Fargo & Co. While the Federal Home Loan Bank believed the securities were “safe,” “in fact the bank purchased a toxic stew of doomed mortgage loans,” Bloomberg quoted the complaint as saying.
The Home Loan Bank’s lawsuit, filed in Cook County Circuit Court, asks the court to void the sales of the securities and direct the banks to reimburse the Home Loan Bank plus 10% annual interest, according to Bloomberg News.
With one of the biggest mortgage-buying programs of any of the 12 wholesale banks, the Chicago institution has struggled through the recession. It’s under orders from its federal regulator not to pay dividends to its members and is redeeming their shares, which don’t trade, only under very limited circumstances.
http://www.chicagobusiness.com/article/20101015/NEWS01/101019921?template=printart
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