By Nate Raymond
NEW YORK, March 27 Fifteen major banks sued by
the Federal Housing Finance Agency over risky housing debt urged
a U.S. appeals court on Wednesday to intervene, citing "gravely
prejudicial" rulings by the trial judge coordinating the
In a joint petition filed with the 2nd U.S. Circuit Court of
Appeals in New York, the banks said U.S. District Judge Denise
Cote, had "systematically deprived" them of evidence to defend
themselves, and issued rulings aimed at coercing settlements.
The banks, which include UBS AG, JPMorgan Chase &
Co and Bank of America Corp, want to reverse
several of Cote's rulings, and get more access to information
about what Fannie Mae and Freddie Mac knew
about mortgage debt they bought prior to the 2008 financial
Fannie Mae and Freddie Mac, the nation's two biggest
mortgage finance companies, are regulated by the FHFA.
The unusual filing Wednesday was a sign of how serious the
litigation had become. Analysts have said the banks face tens of
billions of dollars in possible damages.
The lawsuits, filed in 2011, accuse the banks of violating
securities laws by misleading the Fannie and Freddie about the
quality of home loans packaged into $200 billion in securities.
A spokeswoman for the FHFA had no immediate comment.
Of the 18 lawsuits the FHFA filed, 16 were transferred to
Cote in December 2011. Since then, Cote, 66, has exerted a
strong hand over how the cases have developed.
She has denied motions to dismiss those cases and has said
she thinks the cases should settle. She has also limited
depositions and document discovery and set a speedy trial
The first trial is scheduled for January 2014 against UBS
AG, with others to follow. The banks are awaiting a 2nd Circuit
ruling on whether to reverse Cote's decision to not dismiss the
The banks, which must continue to face Cote, said filing
Wednesday's petition was not something they did lightly. But
they said they "are being forced to proceed under a series of
gravely prejudicial rulings, some aimed at pressuring
petitioners to settle."
Already, one defendant, General Electric Co, has
agreed to settle. Terms were confidential.
In the petition, the banks say Cote has prohibited discovery
into the business side of Fannie and Freddie that put together
mortgage-backed securities rather than purchasing them.
The banks also complain that Cote has limited them to 20
depositions of people at Fannie, Freddie and the FHFA for all 15
lawsuits, while allowing the FHFA to take more than 400 on its
The banks, which also include Citigroup Inc, Deutsche
Bank AG and Barclays PLC, called Cote's
approach "one-sided" and said it is designed to force settlement
rather than "foster fair and reasonable determination of the
"The rulings prejudge facts a jury should decide based on a
full evidentiary record," the banks said.
Cote did not respond to a request for comment on Wednesday.
Stefanie Johnson, a spokeswoman for the FHFA, declined comment.
Other banks that joined the request include First Horizon
National Corp, Goldman Sachs Group Inc, Nomura
Holdings Inc, Societe Generale, Morgan
Stanley, Ally Financial Inc and Royal Bank of
Scotland Group and Credit Suisse Group AG.
The case is In re FHFA Coordinated Securities Litigation,
2nd U.S. Circuit Court of Appeals, No. 13-1122.