Bank of America, JP Morgan, Wells Fargo, Citigroup, and GMAC must pay for the “harm” caused, the writ says.

Martha Coakley, the state’s attorney general, said the banks had no legal right to foreclose on “hundreds, if not thousands, of properties”. The banks have expressed disappointment over the move.

Massachusetts’ action could potentially de-rail attempts to reach a US-wide settlement against banks accused of hastily calling in debts as the country’s property bubble imploded.

Federal and state prosecutors have been negotiating a $25bn (£16bn) deal to resolve the issue over so-called “robo-signing”, where banks employed people to sort out foreclosure documents without reviewing homeowners paperwork and circumstances.

Ms Coakley said: “We have two clear goals with this lawsuit – one is to provide for real accountability for the role the banks have played in unlawful and illegal foreclosures, and secondly to provide for real and enforceable relief for the harm that the misconduct has caused.”

The complaint claims the banks violated Massachusetts law with “unlawful and deceptive” conduct in the foreclosure process, including unlawful foreclosures, false documentation, robo-signing, and deceptive practices related to loan modifications.

A statement from the state attorney general’s office said: “The single most important thing we can do to return to a healthy economy is to address this foreclosure crisis.

“Our suit alleges that the banks have charted a destructive path by cutting corners and rushing to foreclose on homeowners without following the rule of law. Our action today seeks real accountability for the banks illegal behavior and real relief for homeowners.”

JP Morgan said that, much like other banks, it has been holding MF funds and awaiting instructions from the bankrupt company’s trustee.

The bank said the funds are not the missing client funds and the account has always been “transparent” to MF and its trustee.

Government rules require securities firms to keep clients’ money and company money in separate accounts. Violations can result in civil penalties.

Bloomberg had reported earlier that as of Oct. 31, the JPMorgan account had $658.8 million in it, citing a person with knowledge of the matter.

Estimates on the missing client funds have ranged from $1 billion to $700 million.

The US Federal Housing Finance Agency (FHFA) has filed lawsuits against 17 banks, including RBS, Barclays and HSBC, over mortgage-based investments.

Values plunged during the financial crisis and a bailout of mortgage firms cost US taxpayers billions of dollars. RBS says it has “substantial” legal and factual defences to the US claims.

A spokesman said: “We believe we have substantial and credible legal and factual defences to these claims and will defend them vigorously.”

HSBC and Barclays declined to comment to the BBC on the legal action.
Goldman Sachs, Bank of America, Deutsche Bank, Nomura, Citigroup, and Societe Generale are among the other banks facing legal action from the FHFA.

BBC business correspondent Joe Lynam says it is believed the financial institutions are being sued for a sum in the tens of billions.

The FHFA said in a statement that there had been “improper actions by the firms and individuals”.

The bank’s rate-setting committee voted five to two in favor of the cut. It had raised rates five times this year in order to combat rising prices.

The surprise cut has raised questions about the independence of the central bank, after a number of politicians called for a rate cut in recent days.

These included President Dilma Rousseff, who took office in January.
The central bank said high debt and weaker growth in developed economies could impact on Brazil.

A number of analysts were baffled by its decision to cut rates.

The largest US bank said the sale would help it strengthen its capital base to comply with new global regulations, known as Basel III.

It has agreed to sell 13.1bn shares in the Chinese bank to a group of investors it did not name.

The sale is expected to complete in the third quarter and should generate an after-tax gain of $3.3bn. It is expected to increase its core capital by $3.5bn.

The sale marks the bank’s latest move to increase its capital base, and chief financial officer Bruce Thompson said it had added about $5.8bn to its core capital in the month of August “through non-core asset sales and other actions”.

Profits grew in all of the territories where Standard Chartered operates, except for its biggest market, India, where profits fell by 5%.

It blamed rising interest rates, growing competition and regulatory changes for falling profits in India.

Profits grew by 23% in Hong Kong, 34% in Singapore, 14% in South Korea and 19% in China.

Income from its businesses in the Middle East grew 4%, in Africa it grew 10% and in the Americas and Europe it grew 11%.

Zhou Xiaochuan said the People’s Bank of China (PBC) would “closely observe its implementation“, in a statement on the PBC website.

Separately, Chinese rating agency Dagong downgraded the US credit rating, according to Xinhua news agency.

Mr Zhou said China, which is the largest holder of US debt, hopes that the US takes responsible policy measures to handle its debt issues, while keeping the interests of the rest of the world in mind.

But he reaffirmed that China would continue to diversify its reserve assets to minimize the negative impact of fluctuations in the international financial markets on the Chinese economy.

Morgan made a net loss of $558m, or 38 cents per share, during the quarter. However, the loss was caused by a one-off $1.7bn charge, without which Morgan would have made a profit of 64 cents.

The charge was caused by an investor converting its Morgan shares.

The change by the investor in question – Japanese bank Mitsubishi UFJ Financial – had the effect of diluting Morgan’s common shares.

Morgan is just the latest US banking group to report its second quarter results, and analysts said its figures were among the strongest so far.

“We’re seeing some progress here on the turnaround in Morgan Stanley’s trading business, which has been a long time in the making,” said Shannon Stemm, an analyst at Edward Jones

Republicans on Wednesday blocked a bill to raise the debt limit, demanding Democrats first agree to spending cuts.

The US risks default if Congress does not authorize more borrowing by August. A downgrade would increase borrowing costs, slowing the economic recovery.

The US runs a $1.5tr (£916.8bn) deficit and is already about $14.3tr in debt. The country reached its debt ceiling last month, but the US treasury department has begun taking extraordinary measures to avoid breaching the limit.

Leaders of both parties agree to the need to trim the budget in the face of massive budget overruns, but Republicans have refused to allow tax increases, while Democrats have vowed to protect costly social programs.

RBS Asia boss John McCormick said the venture could also help UK companies tap China’s deep pool of capital.

RBS will have a 33% stake in the venture, which will be known as Hua Ying Securities. Hua means “Chinese”, while Ying means “British”. “China is an important part of our strategy,” he added.

It will be based in Wuxi, Jiangsu Province, about two hours away from Shanghai.

Mr McCormick declined to disclose how much the bank had invested in the venture.

RBS is the first UK bank and the seventh bank internationally to get approval to enter the investment banking business in China.

“My vision is that we will be able to bring British, European and US companies to China and allow Chinese investors to gain access to foreign companies, equities and debt,” said Mr McCormick.