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Big Banks are in More Trouble

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America’s biggest banks and financial institutions don’t just lie to and defraud innocent consumers. A recent lawsuit demonstrates that they may also try to break the law when it comes to investors in other financial products as well.

Banks’ Role in Defrauding Investors in the 2000s

As the economy began to collapse in the late 2000s, it became obvious that mortgage-backed investments that were sold to investors were not the solid investments that were promised.

Investment and security rating companies gave high (safe) ratings to these investments—after all, people may not pay a credit card bill or a medical bill, but they tend to pay their mortgage.

When it came to light that these mortgage-backed securities in fact were not safe but rather were filled with risky loans that most of the borrowers could not repay, and as more and more consumers ended up in foreclosure, investors started to ask what happened to the “safe” investments they were promised. Many investors ended up suing the investment banks that had sold them the securities.

Banks in Trouble Again

These same banks are getting sued again for allegedly violating antitrust laws. Citigroup, Deutsche Bank, JP Morgan Chase, Goldman Sachs and others are now named defendants in a new lawsuit brought by investors of municipal and government bonds.

The class action lawsuit, filed in Pennsylvania, alleges that these companies engaged in price fixing, and conspired to charge too much for investment bonds, and colluded to underpay investors on the profits of the bonds.

These bonds are sold privately and not on the open market. With public bonds, information about an investment is generally readily available as public information. But with private bonds, there is no way for a member of the public (or a potential investor) to just look up an investment before buying into. As such, most investors rely heavily on the brokers and institutions that sell the investment.

Because of the opaqueness of the process, the lawsuit alleges, the banks were able to conspire and collude with one another to sell the investments at agreed upon prices set to short the investors. 

Bonds Are Big Business

Manipulating bond prices can cost a city government millions of dollars. Cities rely on bonds as a source of funding everything from public infrastructure to pensions. When banks try to skirt legal processes, they can impact the services that consumers receive from their local governments.

There is also another pending lawsuit as to whether these banks colluded to decrease the amounts the banks purchased Fannie Mae and Freddie Mac bonds from investors, and to inflate the amount they sold these bonds to investors.

As further support for those allegations, the complaint says that the amount that bonds were purchased for was eight times higher before the government started to investigate the potential collusion.

Contact the dedicated Miami consumer rights lawyers at Jacobs Legal in today if you have been a victim of unfair trade practices, or if you have been defrauded by a business or a bank.

Resources:

housingwire.com/articles/48502-worlds-biggest-banks-accused-of-price-fixing-fannie-mae-freddie-mac-bonds#.XJUe0F6Kxk8.facebook

ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/dealings-competitors/price-fixing

https://www.jakelegal.com/more-companies-sued-for-illegal-text-messages-under-the-tcpa/

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