WASHINGTON (AP) — The Justice Department last Thursday sued Barclays Bank PLC and several of its U.S. affiliates over the sale of risky mortgage-backed securities.
The civil complaint, filed in federal court in Brooklyn, New York, seeks to recover civil penalties for fraud from the British bank.
It accuses the bank and its employees of misrepresenting the quality of the loans they sold to tens of thousands of investors between 2005 and 2007, in the run-up to the country’s financial meltdown. The investors, which included credit unions, pension plans and university endowments, lost billions of dollars, the Justice Department said.
The bank falsely assured investors that it had excluded “unacceptable” loans, and that it had conducted due diligence on the loan pools that it had securitized, according to the complaint.
Two former Barclays executives — a banker and a trader — were named as individual defendants in the lawsuit and accused of playing important roles in the alleged fraud.
“As alleged in this complaint, Barclays jeopardized billions of dollars of wealth through practices that were plainly irresponsible and dishonest,” Attorney General Loretta Lynch said in a statement.
In a statement, Barclays said it denied the allegations in the lawsuit and called the claims in it “disconnected from the facts.”
“We have an obligation to our shareholders, customers, clients, and employees to defend ourselves against unreasonable allegations and demands,” the statement said. The bank will seek to have the complaint dismissed.
Last Thursday’s action was just the latest taken against banks in the long aftermath of the 2008 financial crisis. Banks have reached multibillion-dollar settlements with the government over the sale of securities that were promoted as safe investments in the lead-up to the housing market crash, but actually were bundles of mortgages from borrowers unlikely to be able to repay their loans.
- Posted December 26, 2016
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Barclays sued over mortgage-backed securities
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