BREAKING NEWS
May 15, 2007
Attorney General Targets Wall Street
Ohio Attorney General Marc Dann, likening the subprime lending industry to armed robbers, said he wants to sue Wall Street firms because their bond sales enabled consumers to get mortgages they couldn't afford.

Ohio has already won the right through a lawsuit to review foreclosures by New Century Financial Corp., the bankrupt California-based lender. Dann may add investment banks and credit-rating firms to the case or bring new suits, perhaps using Ohio's civil version of the federal Racketeer Influenced and Corrupt Organizations Act, he said in an interview today. The RICO law is used to target organized crime and drug rings.

``If somebody was buying guns and giving them to people to go and take people's houses at gunpoint in Ohio, we'd be prosecuting them and throwing them in jail,'' Dann said.

Ohio has the nation's highest foreclosure rate, in part because manufacturing losses have left the state with the sixth-highest jobless rate. About 3.38 percent of Ohio homeowners with mortgages faced foreclosure as of Dec. 31, the Mortgage Bankers Association reported, compared with 1.19 percent nationwide.

Securities firms encouraged ``irrational loans'' to be made, Dann said, by providing a liquid market in which mortgages were bundled by the thousands and sold as securities.

``I want to see the e-mails, I want to see the documents,'' he said. ``I'm guessing somebody at some or all of these places was predicting the bottom was going to fall out.''

``We are sympathetic to the difficulties that some Ohio homeowners and pension funds have encountered,'' said Chris Atkins of Standard & Poor's. The company's ratings on mortgage bonds -- which Dann alleged understated risks -- aren't supposed to address the ``suitability'' of securities as investments for specific buyers, or of mortgages for consumers, Atkins said.

``We've got to do something to avenge those homeowners and to deter this type of conduct in the future, and hopefully create a pool of money to restore some of these folks to homeownership,'' Dann said.
Bloomberg