Class action lawsuits up against major banking companies throughout America are beginning to build up which is certainly putting an already damaged business sector experiencing considerable pressure. This has been a tough couple of weeks for the US financial sector and the people who are employed in it. 

This week Washington DC continues to be overcrowded with bank executives defending themselves against various foreclosure-related investigations along with one by all 50 state attorneys general. There may be some hope of reaching a settlement, but it will not be able to completely stop the ever increasing quantity of class actions .

In a congressional watchdog report this week, it warned that the foreclosure document debacle could threaten major banks with billions of dollars in class action losses. The impact of this would be disastrous on the housing sector which is already under massive pressure regardless of the government’s effort to safeguard 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.

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

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

You will find people who reason that a compensation find, like one which was created following the BP Gulf oil spill is the very least that can be achieved. The only problem with this is that it doesn’t sort out the bigger problem which is industrial systemic dysfunction. The structure, processes and transparency of banks should be significantly improved to reduce the chances of future financial disasters.