VIA Barry Ritholtz-

MBIA VS. CREDIT SUISSE AMENDED COMPLAINT- ”shady as fck,” “Utter complete garbage” “what does our loan conduit and the Titanic have in common?” “both sleep with the fish.” “no matter how shi*ty production is…”

[…]

2. As discovery in this case thus far demonstrates, in this final role, Credit Suisse wantonly violated the norms of legitimate business practice to induce MBIA to enter into the Insurance Agreement and issue the Policy. It knowingly made material misrepresentations to MBIA, and provided false warranties, to induce MBIA to issue the Policy. These false representations and warranties concerned, primarily, the attributes of the Loans and the manner in which Credit Suisse’s loan conduit operations originated, acquired, and reviewed them. Credit Suisse knew, but did not disclose to MBIA, that the collateral pool was replete with defective Loans, including hundreds of Loans that Credit Suisse already had attempted to return to the originators prior to the transaction with MBIA. Credit Suisse knew, but did not disclose to MBIA, that originators from which it was acquiring Loans were, for example, – in the words of Credit Suisse executives – “shady as fck,” [sic] would “try to get away with anything they c[ould],” and were selling to Credit Suisse “complete garbage. Utter complete garbage.” And Credit Suisse knew but did not disclose that its loan operations were a farce, internally mocked by its own executives. Indeed, in April 2007, just weeks before the Policy issued, a Credit Suisse managing director joked to the senior executive responsible for Credit Suisse’s mortgage loan conduit business, “what does our loan conduit and the Titanic have in common?” Five minutes later, the senior executive responded, “both sleep with the fish.” Other Credit Suisse executives discussed their knowledge that Credit Suisse’s practices encouraged loan sellers “to continue delivering us crap,” which loans were then acquired and securitized by Credit Suisse “no matter how shitty production is and no matter how bad performance is.”

3. In addition to acting as the sponsor, underwriter and servicer for the Transaction, Credit Suisse was the originator of 34.4% of the securitized Loans and provided financing to originators accounting for at least one-third of the securitized Loans. Credit Suisse consequently had intimate knowledge of the Loans and the protocols pursuant to which they were originated, acquired, reviewed and selected for securitization. The depth of Credit Suisse’s actual knowledge and view of the Loans, and the flaws in its loan conduit operations, is only now coming to light from discovery in this matter. That information includes admissions from Credit Suisse’s own files and the sworn testimony of former Credit Suisse underwriters, “client advocates” and “due diligence” providers (the “Confidential Witnesses” or “CW1” to “CW10”). The truth differs markedly from the specific representations made by Credit Suisse to MBIA to secure the Policy.

Of the nearly $1 billion in second-lien Loans that Credit Suisse provided as collateral for the securities, more than 66% of the original loan balance have been charged off as of the date of this Amended Complaint, requiring claims payments by MBIA of more than $386 million under the Policy.

[THE BIG PICTURE]

[ipaper docId=123231834 access_key=key-1gn8pqbdxhlv7lrc8tzl height=600 width=600 /]

Comments

comments