I found the following story on the NPR iPhone App:
by Chana Joffe-Walt
- April 16, 2010
Recently, I got an e-mail. "Subject: Do you know your toxic asset is being sued?"
NPR's Planet Money team had recently pooled $1,000 to buy a toxic asset -- a bond backed by subprime mortgages -- as a window into the housing bust. And for one confused moment, I actually thought we were being sued.
The suit was filed by a carpenters union fund in New Jersey; it turned out the carpenters were suing the bank that created both our bond and theirs.
In 2006, the fund invested $100,000 to buy a bond backed by mortgages. The bond is now worth about $5,000, and the fund wanted to know if there was someone to blame.
"I don't know if you really make sense [of] who screwed up," says George Laufenberg, administrative manager of the New Jersey Carpenters Funds. "Personally, I get a little angry over it because the system basically let everyone down. Period."
The carpenters' toxic asset began its life with the huge subprime mortgage lender Countrywide. So did ours. Countrywide issued bad home loans. But the lender collapsed. What's more, Countrywide didn't sell anything directly to the carpenters.
Is the seller to blame? That was the Royal Bank of Scotland, which bought mortgages from Countrywide, packaged them into complex securities, and sold them as supersafe investments.
For the carpenters to sue RBS, their lawyer would have to find the smoking gun of securities lawyerdom: a misstatement.
The carpenters' lawyer, Joel Laitman, said he read through boxes and boxes of documents to find that misstatement: three lines stating that the underlying collateral in the mortgage-backed securities had underwriting guidelines that required a credit check. A credit check does not seem to have been performed on all these loans, according to Laitman.
"RBS made significant money churning out these triple-A, mortgage-backed securities, and they should be made to pay," he said.
So the carpenters are suing RBS. The suit is working its way through court right now; RBS declined to comment for this story.
RBS itself nearly failed during the crisis. The British government had to bail the bank out, and the government now owns an 84 percent stake in the company. So if the carpenters win their lawsuit, it will be British taxpayers paying them back.
I wanted to check in with a British taxpayer, so I called the Marquis of Westminster, a London pub.
"On one level, it doesn't seem to be fair," Chris Hayes, the pub's owner, told me. "But if it's a bunch of average men on the street trying to get their money back, I suppose I wouldn't mind so much. If it's a bunch of carpenters, then good luck to 'em." Copyright 2010 National Public Radio
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