By Reynolds Holding
NEW YORK, Nov 6 (Reuters Breakingviews) - Recycled legal
claims are beginning to make banks look like victims. Wells
Fargo is saying the U.S. Justice Department sued it twice over
the same dodgy mortgage practices. If true, that's unfair as
well as a waste. Yes, Wall Street still must answer for the
financial crisis. But duplicative suits from state and federal
watchdogs promote resentment, not deterrence.
In February, Wells, Citigroup and three other banks agreed
to pay 49 states and Uncle Sam $25 billion for mortgage
foreclosure flubs. The settlement included a release from claims
that the banks essentially lied to get Federal Housing
Administration backing for mortgages of dubious quality. Last
month, however, the DoJ included similar allegations in a new
suit against Wells.
A court finding of double counting could confirm suspicions
that America's myriad regulators are piling on. Over the past
year, Manhattan's U.S. attorney, the Federal Housing Finance
Agency, the Department of Housing and Urban Development, New
York's attorney general and a state and federal mortgage task
force all have sued Goldman Sachs, Bank of America and 16 other
banks in separate cases under a half-dozen laws over mortgages
or mortgage-backed securities. The Securities and Exchange
Commission and dozens of state and federal officials have filed
suits, too.
It's encouraging that watchdogs are cracking down. It's also
logical that various government attorneys would test different
legal theories and laws on assorted banks. Seeing which
approaches work best could make future lawsuits more effective.
There's a risk to the excess, though. New York's Financial
Services Department highlighted the perils of punishing Standard
Chartered while ignoring other regulators. BofA complained about
compensating "every entity that claims losses" actually caused
by a bad economy. And many banks bemoan how government lawyers
and private attorneys piggyback on their respective legal
actions.
Some of this is just whining, but the pattern is
nevertheless troubling. Redundant lawsuits that come off as
politically motivated undermine the credibility of law
enforcement. Watchdogs really ought to coordinate and choose one
agency to take the lead in each case. That would help reassure
banks they're being legitimately sued for wrongdoing and not
merely jerked around.
CONTEXT NEWS
- Wells Fargo on Nov. 1 accused the U.S. Justice Department
of breaching a $25 billion settlement by filing a new lawsuit
reasserting many of the resolved claims. Federal prosecutors on
Oct. 9 sued the bank for allegedly certifying falsely that its
mortgages and lending practices met Federal Housing
Administration standards. In the prior settlement, however, the
U.S. government released Wells Fargo and four other banks from
liability over largely the same conduct, Wells says. The bank
has asked the U.S. District Court in Washington, D.C., to block
the government from pursuing its claims.
- Several state and federal regulators, including the New
York attorney general, the U.S. Department of Justice, the
Federal Housing Finance Agency and a joint state and federal
task force, have sued numerous banks for allegedly deceptive
practices in selling mortgages or mortgage backed securities.
Though the suits often rely on different laws, they cover
generally the same conduct.
(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)
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