NEW YORK (Reuters) - New York Attorney General Eric Schneiderman brought a lawsuit on Tuesday accusing Credit Suisse Group AG
Credit Suisse, Switzerland's second-largest bank, misrepresented the quality of loans underlying residential mortgage-backed securities it sponsored and underwrote in 2006 and 2007, leading to $11.2 billion in losses to investors, according to the lawsuit.
The Zurich-based bank was aware of problems with the loans it bought, the lawsuit said, but rewarded quantity over quality, to the dismay of some Credit Suisse staffers.
Credit Suisse encouraged loan originators "to continue delivering ... crap," the lawsuit said, quoting one bank trader.
The bank failed to adequately evaluate the loans and ignored defects its limited review did uncover, the lawsuit said. It also allegedly failed to perform due diligence it promised. The case was brought under a New York securities fraud statute known as the Martin Act.
Credit Suisse said it rejected the complaint and looked forward to presenting its defense in court. The complaint "recycles baseless claims from private lawsuits and uses an inaccurate and exaggerated number," the bank said in a statement, apparently referring to the $11.2 billion loss figure.
The bank announced a management shake-up on Tuesday.
The action is the latest out of a joint federal-state working group created by President Barack Obama to go after wrongdoing that led to the 2008 financial crisis.
It "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 in a statement. He is co-chair of the group.
On Friday, Credit Suisse agreed to pay $120 million to settle U.S. civil charges that it misled investors in the sale of risky mortgage bonds prior to the crisis. JPMorgan Chase & Co
Schneiderman also brought a lawsuit against JPMorgan Chase last month over mortgage-backed securities packaged and sold by Bear Stearns & Co, which JPMorgan acquired during the financial crisis.
The working group's actions are viewed as a last shot for the government to hold banks and others responsible for misconduct in the run-up to the mortgage meltdown.
Credit Suisse, JPMorgan and other banks have already been sued by pension funds, insurers and others who claim they misrepresented the quality of mortgages underlying securities.
Schneiderman said on a telephone press conference Tuesday that the government lawsuits focus on systemic conduct, not individual transactions.
He also said his aim "to protect the market" made the lawsuit different than relief sought by private litigants.
The lawsuit seeks damages and restitution for investor losses, and to stop the conduct.
The case is People of the State of New York v. Credit Suisse Securities, 451802/2012, New York state Supreme Court, New York County.
(Reporting by Karen Freifeld; Editing by Steve Orlofsky, Bernard Orr)
Source: http://news.yahoo.com/york-sues-credit-suisse-over-mortgage-securities-192255082--finance.html
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