Chasing Value: Banks, Barron's & Buffett

Banks could face another mortgage crisis, according to Barron's, if they are forced to buy back subprime, Alt-A and options adjusted home mortgage securities they've sold prior to the financial crisis, mostly as mortgage-backed securities. Already some buyers, like Fannie Mae (FNMA) and Freddie Mac (FMCC), have enjoyed some success returning defective mortgages. And this could be just the beginning. The banks, of course, are fighting vigorously to fend off these demands. As usual, the courts will have to settle the matter. The focus of the debate seems to be founded on the issue of representations and warranties that may or may not have been violated. There are no surprises among the 11 banks mentioned. It is the conspicuous absence of names you might expect to find that is. The list is topped by Bank of America BAC and JP Morgan Chase JPM. Former investment banks -- now "real" banks -- Goldman Sachs Group GS and Morgan Stanley MS are also on the list. And among the larger U.S. banks Citigroup C has its place too. Continue reading the article.