It is not just the banks getting wrapped up in this latest FHFA litigation notice. General Electric Co. (NYSE: GE) has issued a release this morning showing that it was also caught up in the FHFA actions. The notice, from GE Reports, is as follows:
Last Friday, September 2nd, 2011, GE was notified for the first time, without any prior discussion, of claims against GE, GE Capital Services and certain other affiliates in a lawsuit filed at the same time as other lawsuits filed against 16 other financial institutions. The suit alleges that inaccurate statements were negligently made by a GE affiliate in offering materials in connection with the sale of two residential mortgage backed securities (RMBS) to Freddie Mac in 2005. These securities were backed by loans originated by WMC, a business GE sold in 2007. Below are some important facts regarding these claims:
- GE plans to vigorously contest these claims ∙ The two transactions in question amounted to $549 million. These securities have since paid down to around $66 million in remaining principal.
- These securities held by Freddie Mac have received all interest and principal payments to date ∙ GE sold the WMC business in 2007, and WMC did not originate any new loans after early 2007.
We cannot help but to ask why the FHFA is acting to further kill the financial sector at a time that is right in the midst of an economic slowdown that risks becoming a double-dip recession. The FHFA defended its actions yesterday and outlined why it is taking action, although it did not pass a smell test as far as we are concerned.
Case studies in universities in the years ahead will be asked how to define how the various government agencies seemed to act in unison to destroy the banks and to cripple the economy. This new recession, if it is a formal recession, will be the fault of the system’s rules and attacks rather than the fault of the participants.
JON C. OGG