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FDIC Sues on Mortgage-Backed Securities Sold to Banks

The Federal Deposit Insurance Corp. sued a group of banks, including JPMorgan Chase & Co. (JPM), Citigroup Inc. (C), Bank of America Securities and Deutsche Bank AG (DBK), in two suits over mortgage-backed securities.

The FDIC, acting as receiver for two failed banks, filed the suits in New York federal court today seeking money the banks allegedly lost on securities backed by residential mortgages. The suits claim a total of $77 million.

The FDIC filed an $11 million claim as receiver for Strategic Capital Bank, a Champaign, Illinois commercial bank that was closed by regulators in 2009. It filed a separate $66 million claim on behalf of Strategic Capital and Citizens National Bank.

The FDIC alleges the defendants misled investors in the registration statements for the securities.

Scott Helfman, a spokesman for Citigroup, declined to comment on the suits, as did Bank of America spokesman Lawrence Grayson and Deutsche Bank spokeswoman Renee Calabro. Phone calls to Joseph Evangelisti, a JPMorgan spokesman, weren’t immediately returned.

The cases are: Federal Deposit Insurance Corporation v. Bear Stearns Asset Backed Secutiries I LLC, 12-CV-4000; Federal Deposit Insurance Corporation v. J.P. Morgan Securities LLC, 12- CV-4001, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Bob Van Voris in federal court in Manhattan at rvanvoris@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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