Yes, the government filed the lawsuits through the Federal Housing Finance Agency against Fannie and Freddie agencies that purchase mortgages loans and mortgage securities issued by the loaners.

Reportedly, the full price tag for the mortgage-backed securities in the lawsuits sums as much as $196 billion. The lawsuit states the mortgage-backed securities were based on documents that '”contained misstatements and omissions of material facts concerning the quality of the underlying mortgage loans, the credit worthiness of the borrowers, and the practices used to originate such loans".

Although this pass is a hard blow to the banks, it is not exactly certain how much the government is pursuing in damages, as it only stated it demands the securities sales to be canceled, and lost principal along with interest and with attorney fees to be compensated.

Many banks, among them Bank of America (which already paid $12.7 billion in settling of resembling claims only this year), JP Morgan Chase, Royal Bank of Scotland, and others, have witnessed spectacular fall of their stock prices, equal to hardly forgotten drops in financial crisis of 2008.

In July, the Federal Housing Finance Agency filed a resembling lawsuit against European Swiss bank UBS AG, wanting to recuperate losses from mortgage-backed securities in total amount of over $900 million.

Nevertheless, financial institutions mentioned above and other sued firms (Ally Financial Inc., previously known GMAC LLC, Deutsche Bank AG, First Horizon National Corp., General Electric Co., HSBC North America Holdings Inc., Morgan Stanley, Nomura Holding America Inc., and Societe Generale) generally comment the government’s demands as “meritless”, and plan to protect their position vigorously. Besides, financial experts and economist already expect the banks to settle harmless soon with the government.

Will all this have an effect on world economy? Definitely. After the stock market is hit, businesses cut production and employment, wages decrease because the work is harder to find… Does it sound familiar to you?