By Jonathan Stempel
(Reuters) - Eight financial services firms have paid the FDIC $190 million to settle claims they misled five U.S. banks into buying risky mortgage securities from the former Countrywide Financial Corp, contributing to the banks' failures.
The FDIC on Thursday said the accord resolves claims against Barclays (LON:BARC) Plc, BNP Paribas (PA:BNPP) SA, Credit Suisse (SIX:CSGN) Group AG, Deutsche Bank AG (DE:DBKGn), Edward D. Jones & Co, Goldman Sachs Group Inc (NYSE:GS), Royal Bank of Scotland Group (LON:RBS) Plc and UBS AG.
Acting as receiver for the failed banks, the FDIC accused the defendants of violating federal and state securities laws based on alleged misrepresentations in offering documents for 21 Countrywide residential mortgage-backed securities they underwrote between 2005 and 2007.
The defendants denied liability, but settled to avoid the uncertainty, trouble and cost of further litigation, according to the settlement agreement. It was not immediately clear how much each defendant paid.
Settlement funds will be distributed among receiverships for Alabama's Colonial Bank, Texas' Franklin Bank and Guaranty Bank, Nevada's Security Savings Bank, and Illinois' Strategic Capital Bank, which failed in 2008 and 2009.
The FDIC, whose full name is the Federal Deposit Insurance Corp, often seizes banks on the brink of collapse, and as receiver seeks to maximize recoveries for creditors.
It said it has filed 19 RMBS lawsuits on behalf of eight failed banks, seeking damages for securities law violations.
A total of 322 banks and thrifts in the United States and Puerto Rico failed between 2008 and 2010, encompassing the heart of the recent financial crisis, the FDIC said.
Countrywide was once the largest U.S. mortgage lender, but became a poster child for making high-risk home loans, including subprime and adjustable-rate mortgages, prior to its July 2008 acquisition by Bank of America Corp (NYSE:BAC).