Friday Headlines: U.S. Set to Sue Big Banks Over Mortgages

The Federal Housing Finance Agency is preparing to sue some of the nation's largest banks over soured mortgage bonds, according to the New York Times and Wall Street Journal.

The agency which oversees Fannie Mae and Freddie Mac is set to file in federal court against a dozen of the nation's biggest banks, including Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank on charges of misrepresenting mortgage securities they sold at the height of the housing boom and seeking up to $900 million in damages.

The suites are in response to angry investors, but could have significant trickle-down effect. The Times reports:

"Investors fear that if banks are forced to pay out billions of dollars for mortgages that later defaulted, it could sap earnings for years and contribute to further losses across the financial services industry, which has only recently regained its footing."

Other news:

A refi surge resulting from low mortgage rates have lenders struggling with volume. [BusinessWeek]

The Fed asks BofA for a contingency plan. [Reuters]

BNY Mellon outgoing chief stands to leave with $36.6 million, despite shareholder effort to limit executive severance.[NY Times]

Michael Arrington founder of the AOL blog TechCrunch, is starting a $20 million venture capital fund. [NY Times]

London Stock Exchange Group is in talks with LCH.Clearnet Group. [DealBook]

UK hedge funds Lansdowne Partners and Odey European suffering one of toughest years. [Bloomberg]

Barclays is one of five firms sued by the trustee liquidating the Madoff firm. [Bloomberg]

The Fed hits Goldman with charges of "a pattern of misconduct and negligence" in its handling of home-mortgages.[WSJ]

CapWest Securities of Lakewood, Colo., is the latest broker-dealer to go bust. [Investment News]

Investors continue to bet on Chinese Internet startups. [WSJ]

Schwab closed the $1B purchase of optionsXpress, which holds 400,000 accounts. [Investment News]