It looks like the foreclosure crisis will cripple the American economy for years because American banks are going to be sued. Things have been ugly, they are about to get a lot worse.
First we have the report from the New York Daily News that banks have suspended 4450 foreclosures because of paperwork problems like missing and inaccurate documents, dubious signatures and banks trying to foreclose on mortgages they don't even own. And that's just New York. There would have to be similar concerns around America. Which raises the question of how many homes would have been foreclosed illegally. That's sufficient ground for litigation, they will be sued.
Then we have this report from an industry newsletter, republished in Forbes, that European banks and funds that bought hundreds of billions of dodgy subprime securities, are now preparing legal action against American banks for their greed, negligence and willful carelessness in underwriting those securities.
As business commentator Robert Gottliebsen says, there is going to be massive retribution.
He writes: "The simple facts are that, while their CEOs might not have known it, the big US banks and institutions have flouted the American law on a scale never seen before in US history. Banks are not popular at the best of times and the US community still cringes at the way they were bailed out. The US legal system looks like it is preparing to take retribution. Massive cases are being mustered which could freeze the US housing industry for years and at the back of all this are the government-owned guarantors Freddie Mac and Fannie Mae. My guess is that if the courts are to regain their influence in the US they must teach the bankers a lesson that they will never forget. And the courts will be supported every way by the American people who see their big banks as little better than common criminals who must be punished."
When that happens, the banks will be seized up. The impact on the US economy will be profound.
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