Intrepid New York Times investigative journalist, Gretchen Morganson, published a report recently revealing sweeping failures within the mortgage underwriting division at Credit Suisse which parallel many of the horror stories reported about banking misconduct, cited by many as the main cause of the 2008 economic collapse.
The report describes internal audit documents recently made public which indicate that while the housing bubble inflated, apparently faulty practices at the Credit Suisse mortgage unit, one of the largest in the U.S., ballooned “to a significant and unacceptable level of operational, financial or reputational risks.” The Federal Housing Finance Agency and the New York attorney general are among plaintiffs in litigation against the beleaguered Swiss banking giant, seeking recovery of losses related to roughly $14B in mortgage-backed securities purchased by Fannie Mae and Freddie Mac.
The Swiss bank’s new CEO, Brady Dougan, insists only a few of its employees were involved in any questionable activities and its compliance had improved. But a former Credit Suisse mortgage trader, Kareem Serageldin, was convicted recently for concealing over $100M in mortgage-backed securities losses and falsely increasing their value when the market collapsed. During Serageldin’s sentencing hearing, at which Judge Alvin K. Hellerstein imposed two and a half years of incarceration as punishment, the SDNY judge described the misconduct as “a small piece of an overall evil climate inside that bank and many other banks.”
Read more of Gretchen Morganson’s New York Times report here.
