Saturday, September 3, 2011

Feds Sue the Banks

Seventeen of the country's biggest banks, including the struggling and financially threatened Bank of America, were sued yesterday by the Federal Housing Finance Agency.

The claim?  Misleading Freddie Mac and Fannie Mae on mortgage backed securities.

Read this excellent article on why the Feds will not win this case.

The idea that the government is bringing huge legal actions against the very banks they need to lend money to lift the nation out of recession is like shooting yourself in the foot to spite your face.  These lawsuits stand little chance of success and most likely will be settled with petty agreements on both sides.  This case is brought solely for political reasons and does nothing but further destabilize an already weak and deteriorating financial system.

The White House certainly knew that Friday's job report for August with ZERO employment growth was coming.  The announcement of lawsuits against the nation's largest banks on the same day the risk of a major double dip recession increased dramatically is the definition of poor timing.

The statute of limitations on these actions should have been allowed to quietly pass and this whole sordid mess left to history.  The banks have not gotten off scott-free for any actions they committed.  This observation is obvious.  If the goal is saving the U.S. economy, it is time to move forward and not hold show trials for the benefit of the 2012 campaign.  The banks have plenty to do to move the economy and showing up for depositions and producing evidence are not on the list.