Wells Fargo could be next bank to face suit under FIRREA

Source indicates the bank is currently under investigation

Maybe it’s a more aggressive stance by the federal government and the Securities and Exchange Commission or continuing anger over responsibility of the financial crisis. Regardless, investigations into the mortgage securities practices of large banks seem to be all the rage these days.

This week, a source close to the matter revealed that Wells Fargo could be the next bank formally charged after being investigated under the Financial Institutions Reform and Recovery Act. Bank of America, JPMorgan Chase & Co, Credit Suisse, and Citigroup have also been scrutinized under FIRREA for mortgage bond sales made before the implosion of the economy in the financial crisis. 

Though Bloomberg reports that the inquiry is not yet public, the source says that U.S. attorneys have been investigating Wells Fargo for more than a year. The investigations are evaluating where the firm was in violation of provisions under FIRREA. FIRREA was established in 1989 after the savings-and-loan crisis. Because the statute of limitations on FIRREA is ten years, federal agencies to would be able file suit against transgressions that occurred at the onset of the crisis in 2007.

Earlier this year, Bank of America was sued by U.S. attorneys for violations of FIRREA. In addition to action brought under federal law, many large banks are still fielding probes from state based agencies.

Also, JP Morgan Chase & Co. is currently in discussion to end probes into its mortgage dealings with the Department of Justice. While a figure of $13 billion has been mentioned in talks, the agreement has yet to be formalized.

For more on bank related investigations check out these stories:

AIG could sue Morgan Stanley over pre-financial crisis deals

Fannie Mae sues nine major banks over Libor manipulation

J.P. Morgan settlement talks could still stall

Executive Editor

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Chris DiMarco

Chris DiMarco, Executive Editor of InsideCounsel magazine, has a background in multimedia production with previous involvement in projects in which he developed and created content...

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