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Banks involved in FHFA lawsuits urge appeals court to intervene

fhfaOn Wednesday, fifteen major banks facing lawsuits by the Federal Housing Finance Agency over risky housing debt urged a US appeals court to intervene in what it called “gravely prejudicial” rulings by the trial judge.

The banks said in a joint petition that U.S. District Judge Denise Cote had “systematically deprived” the institutions of evidence that could be used to defend themselves and issued rulings designed to pressure the banks into settlements with the FHFA, Chicago Tribune reports.

The banks urged the appeals court to reverse a number of Cote’s rulings and are seeking to gain more information about what federal mortgage giants Frannie Mae and Freddie Mac, which are regulated by the FHFA, knew about the mortgage debt they purchased before the 2008 financial crisis.

In 2011, the FHFA filed suit against the banks, which had allegedly violated securities laws by misleading Fannie and Freddie about the quality of home mortgages bundled into $200 billion in securities, according to Chicago Tribune.

Sixteen of the 18 lawsuits were transferred to Cote in 2011, and since then, she has denied motions to dismiss the cases and has stated that the cases should settle. Cote has also limited discovery, expedited the trial schedule and limited depositions in the suits.

The banks, which include Ally Financial, Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank, First Horizon National, Goldman Sachs, JPMorgan Chase, Nomura Holdings, Morgan Stanley, Societe Generale, RBS and UBS, said Cote’s approach is “one-sided,” adding that it is designed to encourage the banks to settle rather than “foster fair and reasonable determination of the issues.”

“The rulings prejudge facts a jury should decide based on a full evidentiary record,” the banks said, Chicago Tribune reports.

One of the defendants, General Electric Co., has already agreed to a settlement, the terms of which were confidential.

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