Wells Fargo is among firms facing federal scrutiny of mortgage-bond sales under a 1989 law the government is using to extend probes of banks roles in the credit crisis, two people with knowledge of the matter said.
U.S. attorneys in San Francisco have been examining Wells Fargo, the nations largest mortgage lender, for more than a year, said one of the people, who asked not to be named because the inquiry isnt public. Authorities are investigating whether the firm violated the Financial Institution Reform and Recovery Act. The law, known as FIRREA, carries a 10-year statute of limitations and allows the government to sue for fraud affecting a federally insured financial institution.
President Obama set up a task force last year thats making use of the law, which stems from the savings-and-loan crisis of the 1980s, while examining mortgage-bond underwriting that fueled investor losses and prompted unprecedented government bailouts of banks in 2008. The task force, comprising state and federal agencies, is focusing on about eight banks, a person familiar with the matter said in October.
Bank of America, Zurich-based Credit Suisse Group AG, and New York-based JPMorgan Chase and Citigroup also are among firms facing FIRREA investigations, people familiar with those inquiries said in August and October.
Oscar Suris, a spokesman for San Francisco-based Wells Fargo, and Josh Eaton, a spokesman for U.S. Attorney Melinda Haag, declined to comment.
U.S. attorneys in Charlotte, North Carolina, sued Bank of America in August, citing FIRREA. The complaint, seeking unspecified penalties, accused the firm of misleading investors, including federally insured financial institutions. The U.S. also said that alleged misconduct posed financial risks to Bank of America itself by making it vulnerable to civil litigation and regulatory cases. The company has been disputing the claims.
Wells Fargo, led by Chief Executive Officer John Stumpf, 60, agreed Sept. 30 to an $869 million settlement with Freddie Mac to resolve disputes over faulty loans sold to the government-backed firm before Jan. 1, 2009. The six biggest U.S. banks have piled up more than $100 billion in legal costs, including settlements and lawyers fees, since the financial crisis, data compiled by Bloomberg show.