The Treasury should offer to buy part of every new loan made to an SME as long as the originating bank accepts a small proportion of any loss and holds part of the loan itself to show its confidence in its lending decision.

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The lawsuit named Community Bank of Northern Virginia and Guarantee National Bank of Tallahassee, which were involved in originating the loans, as well as PNC Financial and GMAC (now Ally Financial), who were accused of buying the loans with knowledge they had illegally high fees rolled into them.

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In 2002 billionaire banker Andy Beal had his Beal Bank sue the Federal Deposit Insurance Corp. in a lawsuit that accused the FDIC of originating faulty subprime mortgages to unqualified borrowers.

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