Stung by its investments in private-label MBS, the Federal Home Loan Bank of Seattle is suing several Wall Street firms in an effort to have them repurchase assets.
"The complaints seek to exercise the Seattle Bank's rights to rescind transactions in which underlying loans did not have the characteristics described in the prospectuses," the FHLB said in a prepared statement. "The Seattle Bank has a responsibility to its member shareholders to enforce its rights with respect to these matters."
According to press reports, the Seattle FHLB, to date, has filed 11 separate lawsuits in King County (Wash.) Superior Court against the underwriters, including Bear Stearns, which is now the property of JPMorgan Chase. (JPM is also a member of Seattle FHLB.)
The $54 billion-asset FHLB suffered $144 million in losses during the first three quarters of 2009, primarily due to credit losses on private-label MBS backed by Alt-A mortgages. The FHLB holds $3.7 billion in private MBS.