First Horizon is among 17 banks being sued by federal regulators for overstating the value of mortgage-backed assets it assembled during the housing boom and sold to taxpayer-backed Fannie Mae and Freddie Mac. First Horizon, better known in Memphis by its old name First Tennessee, was a high-flier during the housing boom when its stock rose to $37 a share. It crashed in 2007, however, and has struggled to stay above $10 since then. It closed Friday at $6.31.
First Horizon is the second downtown Memphis bank facing a big financial hit this year. Regions Financial, whose stock price has fallen below $5 a share, is the parent of Morgan Keegan, which settled with the SEC earlier this year for $200 million over its mortgage-backed bond funds.
The story was reported Friday in the New York Times and other major newspapers. First Horizon is a pygmy among banking giants on the list which includes names like Bank of America, Goldman Sachs, and Citigroup.
The lawsuits were brought by the Federal Housing Finance Agency, which oversees the agencies known as Fannie Mae and Freddie Mac which finance mortgages.
According to the New York Times story, "The legal action opens a broad front in a rapidly growing attempt to force the banks to pay tens of billions of dollars for helping stoke the housing bubble . . . The litigation also marks a more intense effort by the federal government to go after the financial services industry for its alleged mortgage misdeeds. The Obama administration as well as regulators like the Federal Reserve have been criticized for going too easy on the banks, which benefited from a $700 billion bailout package shortly after the collapse of Lehman Brothers in the fall of 2008."
Here is the list of banks being sued, as reported by The Washington Post. The number is the amount in billions that the FHFA says the overstated mortgage-backed assets were worth.
Ally Financial, formerly GMAC 6
Bank of America 6
Barclays Bank 4.9
Countrywide Financial 26.6
Credit Suisse Holdings 14.1
Deutsche Bank 14.2
First Horizon National Corporation 0.883
General Electric Company 0.549
Goldman Sachs 11.1
HSBC North America Holdings 6.2
JPMorgan Chase 33
Merrill Lynch 24.853
Morgan Stanley 10.58
Nomura Holding America 2
The Royal Bank of Scotland 30.4
Société Générale 1.3