Reports about the Federal Housing Finance Agency lawsuits against the nation's largest banks for misrepresenting the quality of mortgage-backed securities drew mixed reactions from the financial community Friday. The New York Times published an article, claiming the federal regulator will sue Bank of America (BAC), which is already facing a slew of MBS and representation and warranties suits, as well as JPMorgan Chase (JPM), Goldman Sachs (GS) and Deutsche Bank (DB). None of the banks, nor FHFA, commented on the report Friday. The suits were filed late Friday. "It is commendable that a federal regulator is working on protecting the taxpayer," said Manal Mehta with hedge fund Branch Hill Capital. "The FHFA lawsuits lend credence to a number of MBS suits that are currently being litigated. These cases include ones brought by mono-line insurers such as MBIA and Assured Guaranty to cases brought by other insurers such as MetLife, Allstate and AIG." Mehta said it will be costly for banks to resolve these issues, adding the "longer they take to try and brush it under the rug, the more expensive it will be become as these cases go through discovery and depositions leading to a constant drip feed of bad news.” Banking analyst Richard Bove of Rochdale Securities views the addition of an FHFA lawsuit as a serious mistake on the part of "a bankrupt government that is destroying the infrastructure of the mortgage finance market in the United States." Bove said the FHFA's desire to compensate the GSEs for losses on MBS is somewhat contradictory because "neither of them did a good job of underwriting the mortgages in the first place." In his view, the GSEs, or FHFA on their behalf, are "saying they had no obligation to underwrite what they purchased or have no fiduciary responsibility to their own shareholders." "The core issue is the U.S. government has progressively destroyed the housing finance industry in its attempt to make it safer and sounder," according to Bove. The government has "destroyed the correspondent lending system because banks cannot face the risk of buying loans from correspondents — and if Fannie Mae and Freddie Mac have no money — then the whole banking system has been substantially reduced." Bove said the Fed's plan thus far has heightened risks for the economy. "They have a goal that we want to create more jobs and to solve the housing problem, and yet their solution to creating more jobs and solving the housing problem is to sue the banks," Bove said. "It doesn't create jobs, it doesn't fix the housing problem. It exacerbates those trends." Write to: Kerri Panchuk.