NY attorney general files suit against Credit Suisse over mortgage securities sales

New York's attorney general filed a lawsuit on Tuesday against Credit Suisse Securities for deceiving its investors about billions in sales of residential mortgage­-backed securities. 

Attorney General Eric Schneiderman filed a Martin Act complaint against the bank for leading its investors to believe that the quality of the securities sold before 2008 were carefully vetted and would be closely monitored, according to the complaint filed in New York State Supreme Court.

"This lawsuit against Credit Suisse marks another significant step in our efforts to hold financial institutions accountable for the misconduct that led to the worst financial crisis in nearly a century," Schneiderman said. 

"Our investigations and legal actions demonstrate that there must be one set of rules for all, no matter how big or powerful the institution may be, and that those rules will be enforced vigorously."



The complaint argues that Credit Suisse failed to adequately evaluate the loans, ignored defects uncovered by its limited review and kept investors in the dark about the lack of depth of its review and problems with the securities. 

In turn, the sales the securities sold in 2006 and 2007 led to losses of about $11.2 billion, or approximately 12 percent of total initial balances of $93.8 billion.  

The suit is seeking investor damages to recoup these losses, as well as other equitable relief.

The loans in the firm's portfolio included many that had been made to borrowers who were unable to repay the loans, were likely to default and ultimately did default.

The findings were made by a state-federal task force created by President Obama earlier this year to investigate those responsible for misconduct contributing to the financial crisis through the pooling and sale of mortgage-backed securities. 

In October, Schneiderman filed a lawsuit against J.P. Morgan Securities, JPMorgan Chase Bank and EMC Mortgage over the same issues. 

"Credit Suisse allegedly engaged in a far-reaching scheme to defraud investors, including Fannie Mae and Freddie Mac," said Federal Housing Finance Agency Inspector General Steve Linick. 

"As victims, Fannie Mae and Freddie Mac have sustained significant losses, which to date have been borne by taxpayers. This lawsuit sends the clear message that reckless lending practices will not be tolerated."