Banks, Investor | featured news

Most of the $40 billion Bank of America has set aside to pay out over the mortgage meltdown can be blamed on malfeasance at Countrywide Financial. But some investors say that BofA’s hands are not totally clean in this mess — and that the bank has gotten off too easy thus far.

Small banks still owe $11 billion of taxpayer money under TARP, and the government is threatening to unload its stakes in them at big discounts to new investors. Nearly four years after Washington bailed out Wall Street, small banks have yet to repay $11 billion of taxpayer money.

Morgan Stanley said a group of investors believes the bank may have sold defective mortgage bonds contained in more than $6 billion of trusts, signaling that it may face litigation over its involvement.

Federal regulators charged a Citigroup unit with negligence Wednesday, saying it misled investors about an investment product it used to bet against them as the housing market deteriorated. Citigroup agreed to pay a settlement of $285 million, which will be distributed to investors, the Securities and Exchange Commission said.

JPMorgan Chase & Co and Bank of America Corp were hit with new lawsuits by investors seeking to recover losses on $4.5 billion of soured mortgage debt, expanding the litigation targeting the two largest U.S. banks.

Bank of America Corp is selling about half its stake of China Construction Bank to a group of investors for $8.3 billion in cash, the bank said on Monday.

HSBC agreed on Tuesday to pay $62.5 million to settle class action claims by investors in a fund that had invested with Bernard L. Madoff.

A group of investors in bankrupt Tribune Co sued JPMorgan, Merrill Lynch, Citicorp and Bank of America, claiming the banks arranged $3.7 billion in loans in 2007 they knew the company could never repay.

Recently released emails show how Goldman Sachs built its mortgage business by closely working with lenders such as Washington Mutual and Long Beach, two firms that a Senate review said "polluted the financial system" with souring loans.

Big shareholders at Goldman Sachs have asked the U.S.