In San Francisco, the local Federal Home Loan Bank is suing JPMorgan and Deutsche, along with seven other securities dealers, over allegations that they lied about the strength of many subprime mortgage-backed securities they created and sold. The Federal Home Loan Bank of San Francisco is seeking $19 billion from the nine defendants.

 

Meanwhile, the city of Milan, Italy, wants out of the interest-rate swaps it bought into from JPMorgan and Deutsche. Told they would benefit by trading in their fixed-rate deals for floating ones, Milanese banks are now afraid of the hit they will take if, as analysts predict, interest rates begin to climb in the next couple of years.

 

As with the American civil case, the Italian one also involves other financial firms. The Italian prosecutor behind the case claims JPMorgan Chase made 45 million Euros and Deutsche Bank earned 25 million Euros from the interest-rate swaps.

-Noel Brinkerhoff

 

‘About That $19 Billion ...’ (by David Tartre, Courthouse News Service)

Federal Home Loan Bank Sues Over Mortgage Securities (by Karen Gullo and Jody Shenn, Business Week)

Federal Home Loan Bank of San Francisco v. Credi Suisse Securities et al. (California Superior Court, San Francisco)

4 Banks Face Trial in Italy Over Interest-Rate Swaps (New York Times)

Deutsche Bank, JPMorgan, UBS Are Charged With Fraud (by Elisa Martinuzzi and Sonia Sirlett, Bloomberg News)