Be sure your sin will find you out

Back in 2009, after UK banks had been rescued by a £850bn taxpayer bailout, the directors of Royal Bank of Scotland threatened to resign if the government stopped them paying bonuses of £1.5bn to staff in its investment arm.

More recently, Bob Diamond of Barclays was equally keen to move on and get back to business as usual:

There was a period of remorse and apology for banks. I think that period needs to be over.

But, like the man said, it ain't over 'til it's over:

Taxpayer-owned Royal Bank of Scotland yesterday emerged as one of the main targets of a multi-billion pound legal case brought by the authorities in the United States.

RBS, Barclays and HSBC are among 17 banks being sued by America’s Federal Housing Finance Agency.

It claims the banks used false claims in sales documents to sell billions of dollars’ worth of mortgage investments to US government agencies, which were then hit by massive losses in the US mortgage crash.

If successful, the claim would be a savage blow to RBS’s finances and shatter any hopes of British taxpayers making back the cash they invested in bailing out the bank for years to come.

The 17 banks, which include most of America and Europe’s leading financial institutions are alleged to have a sold a total of more than $200 billion (£123billion) of mortgages to America’s state-sponsored mortgage companies Freddie Mac and Fannie Mae at the height of the credit boom. RBS sold £18.5billion of the mortgages, second in scale only to JP Morgan Chase, which sold £20.3billion.

Barclays sold £3billion and HSBC £3.8billion. The amount of damages being sought is unclear, but in an identical case, the FHFA is seeking £555million in damages from Swiss bank UBS after it sold £2.8billion of mortgage securities.

If that rate of damages was reflected in the new cases, RBS would be facing a claim for £3.7billion, Barclays just under £616million and HSBC £770million. The total being sought by the FHFA would be about £24.7billion.

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