Class action lawsuits against large banking companies throughout America are beginning to build up which is certainly putting an already strained market sector under considerable stress and strain. It has been a difficult couple of weeks for the US banking sector and the people who work in it. 

This week Washington DC has become flooded with bank executives defending themselves against numerous foreclosure-related investigations together with one by all 50 state attorneys general. There may be some hope of reaching a settlement, but it won’t be able to completely stop the rising number of class actions .

This week a congressional watchdog report warned that the foreclosure document debacle could result in seeing big banks facing class actions worth billions of dollars. The result of this could well be almost crippling on the housing and financial sector which is currently under enormous pressure even with the governments efforts to protect homeowners. 

The class actions which may be nationwide are seeking compensation for homeowners whose property was illegally foreclosed by banks using fraudulent documents. Class action lawsuits have been filed in Maryland, New Jersey and Massachusetts that target Bank of America Corp., Wells Fargo & Co., HSBC PLC and JPMorgan Chase & Co. In Florida and Maine, Ally Financial, formerly known as GMAC Mortgage, may also be targeted.

Several banks have had to hire crisis management specialists and are working day and night to slow or possibly stop a total public relations and financial disaster. America’s biggest lender, Bank of America is already experiencing a 21% downturn in shares, rendering it the most sluggish in the 30 stocks that comprise the Dow Jones industrial average.

If a settlement is reached with the state attorneys general, this doesn’t mean settlements shall be reached with all the class actions, but it could help limit the damage. The economic downturn over the last few years has seen the public image and level of trust in banks and their employees suffer significantly. The way they operated, their short term strategy, the amount of money they made, made millions of people around the world brand them as public enemy number one. 

There are individuals who debate that a settlement find, like one which was created after the BP Gulf oil spill is the minimum that can be carried out. The only problem with this is that it doesn’t tackle the greater problem which is industrial systemic dysfunction. The structure, processes and transparency of banks need to be substantially improved upon to reduce the probability of future financial disasters. 

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