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Friday January 25, 2013
NEW YORK: General Electric Co (GE) has agreed to settle a federal agency's lawsuit accusing it of misleading Freddie Mac into buying US$549mil of mortgage-backed securities, according to the Federal Housing Finance Agency (FHFA).
The settlement is the first from a series of lawsuits the FHFA filed against Wall Street banks in 2011 in its role as conservator for Fannie Mae and Freddie Mac.
The lawsuit against GE named subsidiaries including financial services unit GE Capital.
Terms of the accord were not announced.
“This settlement resolves the dispute between FHFA and GE consistent with FHFA's responsibilities as conservator of Freddie Mac,” Alfred Pollard, the agency's general counsel, said in a statement.
“FHFA is pleased this lawsuit has been resolved and appreciates the work of Freddie Mac in this matter.”
Russell Wilkerson, a spokesman for GE, declined comment.
The FHFA's lawsuits claimed that GE and 17 other financial institutions were to blame for Fannie and Freddie's losses on more than US$200bil in mortgage-backed securities.
The lawsuits are among the myriad cases filed since the 2008 financial crisis by investors, insurers and regulators against banks that packaged home loans into securities. The lawsuits generally have accused the banks of misrepresenting the quality of loans.
In the GE case, the FHFA accused the company of making inaccurate statements in the offering materials for two mortgage-backed securities sold to Freddie Mac in 2005.
The lawsuit has been pending in US District Court in Manhattan. A court filing on Wednesday showed that the FHFA was voluntarily dismissing the case. Reuters
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