The other shoe dropped: TBTF banks sued over mortgage-backed securities. [View All]

Federal Home Loan Bank of Chicago sued lenders including Bank of America Corp. claiming their failure to disclose relaxed subprime mortgage underwriting standards, led it to unknowingly buy risky mortgage-backed securities.

Bank of America and the other defendant commercial banks, including Citigroup Inc., Goldman Sachs Group Inc. and Wells Fargo & Co., sold it more than $3.3 billion in residential mortgage-backed securities, according to the complaint.

“The defendants did not tell the bank the truth about the loans that comprised the mortgage pools,” underlying the securities, the Federal Home Loan Bank alleged. While it believed it was acquiring “safe” securities, “in fact the bank purchased a toxic stew of doomed mortgage loans,” according to the complaint.

http://www.bloomberg.com/news/2010-10-15/bank-of-america-sued-by-chicago-home-loan-bank-over-subprime-mortgages.html
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HA !!!!! They tried to have you believe this was *only* about "foreclosures" and "robo-signers".
No way!
This is about pervasive, systemic fraud going back years, beginning from home sales to packaging the mortgages and selling them at a premium to ...well, everybody....pension funds, Fannie Mae, foreign investors.

As Denninger puts it:

in this case, to the tune of a half-billion dollars out of $4.3 billion originally invested - in losses thus far.

Now that's not a huge amount of money.... but then again, $4.3 billion is a tiny slice of the more than $1 trillion in the private-label securities out there, and an even smaller piece of the whole, including GSE paper that may also be contaminated.

http://market-ticker.org/akcs-www?post=169404