The U.S. Department of Justice (DoJ) is conducting a probe into at least nine banks concerning their sale of mortgage-backed securities, reports Financial Times.
Kara Scannell, Tom Braithwaite and Camilla Hall of the Financial Times report the investigation covers a vast array of large banks including Citigroup Inc (NYSE:C), Bank of America Corp (NYSE:BAC), Credit Suisse Group AG (ADR) (NYSE:CS), Deutsche Bank AG (NYSE:DB) (FRA:DBK) (ETR:DBK), Goldman Sachs Group Inc (NYSE:GS), Morgan Stanley (NYSE:MS), Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) (AMS:RBS), UBS AG (NYSE:UBS) and Wells Fargo & Co (NYSE:WFC).
JPMorgan’s settlement with DoJ
Recently JPMorgan Chase & Co. (NYSE:JPM) reached a tentative agreement to pay a record $13 billion fine to the Justice Department (DoJ) to settle probes into its residential mortgage-backed securities.
According to the Financial Times report, the nine banks face investigations as part of an effort by the task force that reached the $13 billion agreement with JPMorgan Chase & Co. (NYSE:JPM).
The state and federal RMBS task force was formed by the Obama administration in January 2012. This was an offshoot of New York Attorney General Eric Schneiderman urging finalization of a national settlement with five major banks over their foreclosure practices.
Citing people familiar with the investigation, Kara Scannell, Tom Braithwaite and Camilla Hall of Financial Times noted discussions with the banks have picked up recently after Attorney General Eric Holder publicly indicated that more MBS lawsuits would be coming by the end of the year.
The task force’s initiatives are gaining ground, with the attorneys general of California and New York investigating banks after their involvement in the recent $13 billion JPMorgan Chase & Co. (NYSE:JPM) settlement.
Biggest banks’ MBS exposure
Earlier, Tom Braithwaite, Kara Scannell, Camilla Hall, and Gina Chon of the Financial Times reported Bank of America Corp (NYSE:BAC) has the biggest exposure when selling the mortgage-backed securities to Fannie Mae and Freddie Mac, with a notional value of over $57 billion compared to $33 billion by JPMorgan Chase & Co. (NYSE:JPM). While Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) (AMS:RBS) has a $33 billion notional exposure, smaller claims exist against Credit Suisse Group AG (NYSE:CS), Goldman Sachs Group Inc (NYSE:GS) and Barclays PLC (NYSE:BCS) (LON:BARC)
Citing people familiar with the matter, the Financial Times reports Bank of America Corp (NYSE:BAC) is under investigation by California, New Jersey and Atlanta attorney offices, while Morgan Stanley (NYSE:MS) is facing investigation from the North District of California. While Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) (AMS:RBS) is under investigation by the U.S. attorney’s office in Massachusetts, Citigroup inc (NYSE:C) is facing investigation from the prosecutors in Brooklyn and Colorado.