The Wall Street Journal has an interesting story that begins with a look at a 74-year-old, disabled woman who lost her life savings—$55,000—in the credit crisis.
She and 22,000 other people, many elderly, lost about $750 million when a Philadelphia lender called American Business Financial Services Inc. went bankrupt three years ago. ABFS had funded its operation partly by selling notes directly to the public, pitching them in newspaper ads and mass mailings that promised high interest rates. When it went under, these notes, which carried no collateral and weren't insured, became worthless.
Now a bankruptcy trustee is trying to recover money from the investment banks that turned the lender's loans into securities. His claim: They helped keep the lender alive—and paying them fees—by enabling it to overstate the value of assets on its books.
Defendants in a suit the trustee has filed include Bear Stearns Cos., JPMorgan Chase & Co., Morgan Stanley, and Credit Suisse Group. In court filings, all deny any wrongdoing or knowledge of what the trustee alleges. All declined to comment for this article, through a spokesman or lawyer.
Full article here.
Reader Comments