New York AG Accuses Credit Suisse of Fraud

$11.2 billion connected to mortgage-backed securities

New York's attorney general accused Credit Suisse Group AG of an $11.2 billion fraud Tuesday, saying the Swiss bank ignored its due-diligence standards to maintain good relations with mortgage originators and ensure a steady pipeline of loans to package into securities.

According to the attorney general's complaint, Credit Suisse Securities (USA) LLC led its investors to believe the quality of the loans in its mortgage-backed securities before 2008 had been carefully evaluated and would be continuously monitored. However, the firm instead failed to adequately evaluate the loans and ignored defects its limited review did uncover, according to the complaint.

Internally, traders and other employees at Credit Suisse referred to mortgages they were getting as "crap" and "garbage," and graded some of their top-contributing originators as consistently failing to comply with underwriting guidelines, the lawsuit said.