New Jersey sues Credit Suisse over mortgage securities
(Reuters) - The New Jersey attorney general sued a unit of Swiss bank Credit Suisse Group AG (CSGN.VX) on Wednesday and accused it of misrepresenting the risks on more than $10 billion in securities backed by home loans.
Credit Suisse did not disclose that the loan originators it used had poor track records of defaults and delinquencies, and that some had been suspended from doing business with the bank, the state said in its lawsuit.
Credit Suisse's own traders were not willing to hold the securities on the bank's books, yet the bank was selling them to investors, it said.
The bank was also reimbursed tens of millions of dollars by loan originators for defective loans, but didn't pass those funds along to the trusts that owned them, it said.
"The kind of conduct described in this lawsuit is the kind of conduct that helped put the nation in financial crisis," John Hoffman, the acting attorney general in New Jersey, said in a statement.
A Credit Suisse representative said the complaint is without merit. "It recycles baseless claims and uses inaccurate and exaggerated figures," spokesman Drew Benson said. "We look forward to presenting our defense in court."
The attorney general in New York filed a similar case against the bank in November 2012. Credit Suisse in currently fighting that lawsuit.
Reuters reported on Tuesday that the U.S. Justice Department is also actively investigating Credit Suisse's representations on mortgage securities it sold in the run-up to the financial crisis.