The Richmond Times-Dispatch is reporting that Virginia is planning to sue some of the largest commerical banks in the world, including Barclays Capital Inc., Citigroup, Morgan Stanley and Goldman Sachs & Co. among others, for committing fraud against taxpayers that led to the bursting of the real estate bubble and the country’s recession.
Attorney General Mark R. Herring said that “Banks were packaging mortgages into securities or bundles of mortgages at a breakneck pace, selling them off to investors as a sturdy, solid, top-rated investments that would continue to rise in value.”
However, many of these deals were sub-prime loans and in the rush to sell more and more of these securities many of the commercial banks lied about the quality of the mortgages.
Herring’s office also released that these securities started to be bought in 2004 and just 6 years later in 2010 Virginia was forced to sell these “toxic” securities resulting in the loss of $383 million.
All of the information regarding the lawsuit was kept secret until Tuesday due to the Fraud Against Taxpayers act, but now the accused banks have the chance to respond to the accusation and negotiate terms for a possible settlement.