U.S. sues Barclays for fraud dealing of mortgage securities

World - Mohit Shah - Dec 24,2016

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us sues barclays for fraud dealing of mortgage securities

Barclays has been charged by the U.S. Justice Department, alleging the bank was involved in the fraud selling of mortgage securities worth $30 billion.

A complaint was filed against U.K.’s second-largest bank on Thursday regarding the fraud dealing with mortgage securities that fueled up the financial crisis.

The step was taken by senior Obama appointees in the U.S. Justice Department to resolve the eminent inquiries of precrisis conduct related to major banks before the officials exit the office in mid-January.

It has been stated that the British bank deceived investors regarding the quality of loans which concealed mortgage securities worth tens of billions of dollars between 2005 and 2007. This lawsuit was filed in U.S. district court in Brooklyn, New York.

The complaint also said, loans had been offered to borrowers with no ability to repay and were based on inflated home evaluations. Mortgage securities have been sold to a wide range of investors by Barclays involving financial institutions, federal home-loan banks, pension plans, Fannie Mae and Freddie Mac, credit unions, charitable and religious organizations along with university endowments.

“Many of these investors suffered devastating losses,’’ as stated in the lawsuit. Moreover, two former New York-based Barclays executives, Paul Menefee and John Carroll, have been singled out in the suit. These two officials were hired in 2003 to manage the bank’s asset-securitization team.

Barclays is listed with several European banks which have been under investigation for misconduct in the selling of mortgage securities, which did boost the 2008 financial crisis.

Prominent U.S. banks such as JPMorgan Chase and Bank of America have already shed tens of billions of dollars to enter a settlement with the U.S. authorities over similar issues related to securities.