I've written before that there should be an avalanche of civil lawsuits against the banksters and their accomplices and now it seems that will come to pass. Yves Smith at Naked Capitalism provides a few details:
A second issue that is not getting the press it deserves is that banks are almost certain to take losses (and we don’t mean writedowns, as in recognizing impairments they arguably should have ‘fessed up to sooner, but hard dollar payments to third parties) on litigation and claims made under old mortgage securitizations.
The banks made legal representations and warranties regarding the loans they sold. If the loans fell short of the contractually agreed upon standards, the seller has to make good in some form, say substitution of good collateral for the bad loan, or monetary damages. But the recoveries, by parties like Freddie, Fannie, AIG, MBIA, and Ambac, are going to come straight out of the bottom lines of banks.
Yves also cites another writer who estimates the amount of losses:
As Chris Whalen noted:
The wave of loan repurchase demands on securitization sponsors is the next area of fun in the zombie dance party, namely the part where different zombies start to eat one another. The GSE’s are going to tear 50-100bp easy out of the flesh of the banking industry in the form of loan returns on trillions of dollars in exposure, this as charge-offs on the several trillion in residential exposure covered by the GSEs heads north of 5%. The damage here is in the hundreds of billions and lands in particular on the larger zombie banks, especially Bank of America (BAC) and Wells Fargo (WFC).
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