Say it ain't so, in a brogue
A ruling at last on a lawsuit stemming from the 2008 financial collapse. From the Financial Times:
A US judge ruled that Nomura and Royal Bank of Scotland had misled investors in mortgage-backed securities, the first court verdict in a case that has lasted almost four years and seen the world’s biggest banks pay more than $20bn to settle allegations of pre-crisis wrongdoing.
Denise Cote, a senior federal judge on the US district court for the southern district of New York, ruled on Monday that the “offering documents did not correctly describe the mortgage loans”, with the securities constructed from loans to borrowers whose chance of repaying was much lower than advertised. “The magnitude of falsity, conservatively measured, is enormous,” she said.
Nomura, at least, says it will appeal. Good luck with that. From the NY Daily News:
The Federal Housing Finance Agency, which brought the suit, had introduced emails among Nomura executives during a three-week trial that indicated they knew the mortgages were bad.
One email included the line “This one is crap,” referring to mortgages underwriting a bond.
Another warned: “Danger Batman!!”
Factual rulings in Cote's “incredibly thorough,” 361-page decision may make winning on appeal difficult, according to David Reiss, a professor at Brooklyn Law School quoted by Bloomberg.
Bloomberg offers a little background as well:
Before the trial, FHFA had reached $17.9 billion in settlements with other banks, including Bank of America Corp., JPMorgan Chase & Co. and Goldman Sachs Group Inc. The ruling against Nomura and RBS may encourage other banks to settle mortgage-related suits brought by regulators and private investors rather than face the bad publicity and cost of an adverse judgment, said Robert C. Hockett, a professor at Cornell Law School.
“They look pretty bad,” Hockett said in an interview. “They look like the strategy has blown up in their faces.”
You know, they might have chosen honest dealing in the first place. I guess that would not have been as buzz-inducing, or as profitable. Life in the inner-city, you know. Broken homes. Dysfunctional families. Street culture. Once again, no one on Wall Street will go to jail.