Credit Suisse Securities and Merrill Lynch have been fined $4.5 million and $3 million, respectively, for misrepresenting the risks associated with certain residential sub-prime mortgage securitizations (RMBS) that they offered to investors[1]. The fines were assessed by the Financial Industry Regulatory Authority (FINRA). The lenders failed to provide historical performance information for past performance of similar loans in order to help investors make informed decisions about how future returns will potentially be impacted by borrowers’ failure to make their loan payments. Additionally, they did not always disclose how risks were calculated.
FINRA reported that Credit Suisse did not inform clients about 21 misrepresentations on the sub-prime RMBS, and “failed to monitor and supervise the reported of historical delinquency rates”[2]. This, explained Brad Bennett, FINRA enforcement chief, “deprived investors of information essential to assessing the profitability of mortgage-backed investments.” Credit Suisse failed to correct the errors once they were identified. Merrill Lynch misrepresented 61 sub-prime RMBS, but corrected errors on its website about a year later.
Since that time, Bank of America acquired Merrill Lynch and has dealt with the issue, according to BofA spokesman Bill Halldin. “We are pleased to resolve this matter, which pre-dated Bank of America’s acquisition of Merrill Lynch,” he said. Credit Suisse representatives declined to comment.
Do you think that enough has been done to rectify this problem?
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[1] http://nationalmortgageprofessional.com/news25365/finra-fines-credit-suisse-and-merrill-lynch-misrepresentations-sub-prime-securitizations
[2] http://www.bloomberg.com/news/2011-05-26/finra-fines-credit-suisse-bank-of-america-over-securitizations.html
Do I think that enough has been done to rectify this problem? Not really. Show me the indictments for Barney Frank, Chris Dodd, Franklin Raines, Jamie Gorelick, Jim Johnson, and the rest of the usual suspects. Case closed when the perps reap what they have sown.
Yes, let’s fine the politicians and regulators who are the real authors of this whole mess, and stop letting them scapegoat the lenders they regulate. Some of these individuals are no longer with us (it started back in the Carter administration), but Barney Frank’s stretch in the House goes all the way back to 1981. [BTW, let's hear it for term limits!] That’s probably not practical (politicians give themselves immunity), but failing to recognize the cause means that we are condemning ourselves to repeat this cycle over and over and over….
Now that the sage wisdom of FDR and the benefits of Glass-Stegal have been proven, if not acknowedged, the responsible Government agencies and stooges are falling over themselves pretending to do something in the “Public Interest” – like affixing blame for matters that never should have taen place, wouldn’t have if the Banking Act of ’33 had not been totally dismboweled!
4.5M and 3M in fines? Are you kidding me? How much do you think they profited? Ten to twenty times that amount? Hundreds of millions? Where is the deterrent? The regulations were gutted at the behest of major banking figures. Who do you think runs the government?