New York sues Credit Suisse over mortgage securities
NEW YORK (AFP) - The state of New York sued Credit Suisse for fraud on Tuesday over the sale of questionable mortgage securities that dealt buyers US$11.2 billion (S$14 billion) in losses in the United States (US) housing meltdown.
Following a similar suit against JPMorgan Chase in October, New York Attorney General Eric Schneiderman said the Swiss bank deceived investors over the quality of residential mortgage-backed securities (RMBS) that it sold in 2006 and 2007.
The suit said that the bank knew that the RMBS it was selling as quality investments were full of high-risk, subprime home loans that the bank's own traders branded "garbage". Moreover, Credit Suisse extended financing to the originators of the bad loans which it packaged into RMBS for sale.
The bank was "more focused on keeping a high volume of loans coming to them from originators than they were on keeping defective loans out of the pools of collateral underlying their RMBS", the suit said.