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Credit Suisse: Bid to Dismiss Lawsuit Denied

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Credit SuisseFor its role in the US housing finance mess, the Swiss banking giant, Credit Suisse, can be prosecuted and fined. Earlier, Credit Suisse had filed a formal motion to have the lawsuit regarding fraud pertaining to the sale of mortgage securities that ultimately lead to $11.2 billion in losses during the housing crisis to be dismissed by the court but that bid was denied.

Instead, Justice Marcy Friedman with the Supreme Court in New York gave full authorization to Eric Schneiderman, Attorney General in New York, to move forward in pursuing the lawsuit. Credit Suisse’s claim that the three-year statute of limitations had passed was also denied by Friedman. According to the court, New York actually has up to six years to file the case against the banking giant, not three.

In November 2012, Schneiderman filed a formal lawsuit against Credit Suisse in which he stated that investors had been deceived by the bank regarding the quality of securities backed by residential mortgages that were sold during both 2006 and 2007.

Also included in the lawsuit was the claim that Credit Suisse was fully aware that the securities being sold as “quality” were in fact loaded with home loans deemed to be high risk and subprime. In fact, Schneiderman said that even Credit Suisse’s own traders called the securities garbage.

In the initial complaint filed with the court, Schneiderman argued that Credit Suisse knowingly allowed investors to think the securities had been carefully evaluated by the bank and that ongoing monitoring would be provided by the bank.

In truth, Credit Suisse failed to properly check the loans and making matters worse, it purposely kept investors out of the loop regarding the inadequacy of the procedures used to review the securities.

With the court’s new decision, a settlement between and bank and state authorities can proceed. If the court finds Credit Suisse guilty, it faces stiff financial penalties adding up to billions of dollars.

Last year, JPMorgan came to an agreement to pay $13 billion to state and federal agencies specific to losses incurred by falsely marketing securities that were backed by mortgages. Once the settlement was made, the proceedings started by Schneiderman, as well as others, came to an end.

In addition, Bank of America paid out close to $17 billion and Citigroup $7 billion last year to settle similar claims relating to high-risk securities with mortgage backing.

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Filed Under: Headlines Tagged With: Credit Suisse, lawsuit, mortgage-backed, New York, securities

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