C Suisse and Citigroup said probed over mortgage-bond sales

Credit Suisse and Citigroup are among banks grappling with a round of U.S. probes into mortgage-bond sales, as the government uses a 1989 law to extend scrutiny of Wall Street’s role in the credit crisis and seek additional penalties from the industry.

Bloomberg reports that the Justice Department is examining whether both companies violated the Financial Reform, Recovery and Enforcement Act, which targets misconduct affecting federally insured financial firms, according to people briefed on the situation.

JPMorgan and Bank of America also are facing FIRREA inquiries, people familiar with those cases have said.

A task force created by President Barack Obama last year is making use of the law, a relic of 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. FIRREA carries a 10-year statute of limitations, giving investigators twice as much time to bring complaints than allowed under other securities laws.

The wave of FIRREA probes will lead to 'increased litigation costs for banks resulting from government investigations and related private plaintiff litigation and increased exposure for executives involved in these probes', said Keith Miller, a partner at Perkins Coie in New York.

To access the complete Bloomberg article hit the link below

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