Nine Firms Sued by Federal Home Loan Bank of San Francisco

The ""Federal Home Loan Bank of San Francisco"":http://www.fhlbsf.com/default.asp, one of 12 Federal Home Loan Banks in the United States, filed suit against nine securities dealers on Monday in relation to the bank's investments in private-label residential mortgage-backed securities (PLRMBS).

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According to court documents filed in the Superior Court of California for San Francisco County, the bank filed two securities complaints against units of Bank of America Corp., Bear Stearns, Credit Suisse, Deutsche Bank, JPMorgan Chase, Merrill Lynch, Morgan Stanley, Royal Bank of Scotland, and UBS.

Claiming the dealers made untrue or misleading statements about the characteristics of the mortgage loans underlying the securities, the bank is seeking to rescind its purchases of 134 securities in 113 securitization trusts, for which it originally paid more than $19 billion.

Based on information provided by the securities dealers, all of the PLRMBS in the bank's mortgage portfolio, including those identified in the complaints, were rated AAA when purchased. These investments support the bank's mission of promoting housing, homeownership, and community development by providing the bank with greater financial flexibility in helping members meet the credit need of their communities.

In filing these complaints, the Bank seeks to continue supporting its mission and protect the interests of its member shareholders, including more than 400 community banks, credit unions, and savings institutions headquartered in Arizona, California, and Nevada.

The San Francisco bank isn't the only Federal Home Loan Bank to take action against securities dealers. The Seattle bank sued 11 firms in an effort to recoup $4 billion in certificates backed by faulty mortgages, and the Pittsburgh bank filed suit against various banks and ratings agencies for misrepresenting $2.7 billion in securities deals.