| NEW YORK, July 23
NEW YORK, July 23 A federal judge on Wednesday
said banks faced an uphill battle in convincing her to dismiss a
U.S. regulator's claims that they misled Fannie Mae and Freddie
Mac into buying mortgage-backed securities that later went sour.
At a hearing in New York, U.S. District Judge Denise Cote
cast doubt on whether she would revisit her ruling finding the
Federal Housing Finance Agency (FHFA) did not wait too long in
suing the banks.
"I don't want anyone to be surprised if in my view the
defendants have a steep hill to climb here," Cote said before
hearing arguments from the lawyers.
The hearing was prompted by motions by HSBC Holdings plc
, Goldman Sachs Group Inc and Nomura Holdings Inc
, the three primary remaining banks with lawsuits before
Cote out of 18 the FHFA filed in 2011 over about $200 billion in
A ruling for the banks could avert what would be some of the
biggest U.S. trials to spill out of the 2008 financial crisis.
Goldman Sachs and HSBC are scheduled to face trial Sept. 29. A
trial in the Nomura case is due for Jan. 26.
Other banks have settled ahead of trial, enabling the FHFA
to recover $16.1 billion.
The cases moved forward after Cote in 2012 issued a key
ruling rejecting an argument by UBS AG that the case
against it was untimely.
The 2nd U.S. Circuit Court of Appeals in New York upheld
Cote in 2013. UBS later settled for $885 million, but the
ruling's reasoning subsequently was applied to the remaining
In June, the U.S. Supreme Court ruled in an environmental
case that a federal law did not preempt a state-law statute that
placed time limits on bringing a lawsuit that applied even if a
plaintiff did not know it had a claim.
The ruling prompted HSBC, Goldman and Nomura to push Cote to
consider the timeliness issue again in the FHFA cases, which
also assert state-law claims.
On Wednesday, the banks and FHFA, both brought in
high-profile litigators, David Boies and Kathleen Sullivan,
respectively, to argue the case.
Sullivan, a former dean of Stanford Law School representing
the FHFA, said a 2008 law establishing the agency as conservator
for Fannie and Freddie after the financial crisis was intended
to give it time to build cases like these.
"The statute's purpose is to enable the FHFA to have the
time it needed," she said.
But Boies, who represented HSBC and is perhaps best known
for representing former Vice President Al Gore in the 2000
presidential election recount, said similarities between the
FHFA's cases and the Supreme Court one were "striking."
"The issue that we have here is not a disagreement between
Ms. Sullivan and myself," he said. "The issue is we have a
disagreement between the plaintiff and the Supreme Court."
The case is Federal Housing Finance Agency v. HSBC North
America Holdings Inc, U.S. District Court, Southern District of
New York, No. 11-6189.
(Reporting by Nate Raymond in New York; Editing by Tom Brown)