TOPICS > Economy

News Wrap: Government Sues Big Banks Over Risky Mortgages

September 2, 2011 at 12:00 AM EDT

HARI SREENIVASAN: The jobs report renewed fears of a new recession on Wall Street. The resulting sell-off wiped out the week’s gains. The Dow Jones industrial average lost 253 points to close at 11,240. The Nasdaq fell more than 65 points to close at 2,480. For the week, the Dow lost a fraction of a percent; the Nasdaq was flat.

The federal government will take 17 of the country’s largest banks to court over risky mortgages. The Federal Housing Finance Agency filed suit today against Bank of America, Citi, Goldman Sachs and others. The suit charged they misrepresented the quality of mortgage-backed securities before the housing meltdown in 2008. The agency oversees mortgage giants Fannie Mae and Freddie Mac, which invested in those securities.

President Obama has overruled the Environmental Protection Agency and dropped a plan for stricter curbs on industrial smog. A White House announcement today cited the need to ease regulatory burdens on business. Republicans and business leaders insisted the smog proposal was too costly. Environmental groups said the president’s decision comes at the expense of public health.

The Gulf Coast braced today for Tropical Storm Lee and a Labor Day weekend deluge. The storm formed this afternoon with winds of 40 miles an hour. It was moving toward a possible landfall along the Louisiana coast with up to 20 inches of rain.

Louisiana Gov. Bobby Jindal declared a state of emergency, and he urged the public to keep a watchful eye.

GOV. BOBBY JINDAL, R-La.: This is a holiday weekend. I know there are football games. I know people are going to be paying attention to a lot of different things over this weekend. It is very important for folks to pay attention to the weather in their area, to pay attention to flash flood warnings from local officials. This is also a great opportunity for everybody in south Louisiana to prepare now.

HARI SREENIVASAN: Mississippi Gov. Haley Barbour also declared an emergency. He warned there’s a potential for tremendous flooding. It was unclear if the storm would get close enough to Texas to help relieve the state’s prolonged drought.

It has been a week since Hurricane Irene hit the East Coast, and close to 900,000 people were still waiting today for the lights to come back on. Long days in the dark sparked calls for investigations in Rhode Island and for rebates in Massachusetts. Meanwhile, the governor of North Carolina said Hatteras Island on the Outer Banks will reopen to tourists within a month, after workers build a temporary bridge.

In Syria, it was another Friday of bloodshed in the country’s five-month-old uprising. Troops fired on crowds of protesters in cities across the country and killed 13. In another development, the European Union banned imports of oil from Syria. The move was designed to put more pressure on President Bashar Assad to end the crackdown.

Turkey expelled the Israeli ambassador and cut military ties today after Israel refused to apologize for a raid off the coast of Gaza last year. Commandos boarded a flotilla of vessels that were planning to run the Israeli blockade of Gaza. Nine pro-Palestinian activists died in the fighting, including eight Turkish nationals. Today’s action followed reports that a U.N. investigation upheld the blockade, but found the Israeli raid was an excessive use of force.

The whistle-blowing group WikiLeaks has come under fire again after publishing all 250,000 State Department cables on its website. Unlike earlier leaks, the names of human rights activists, informants and others were not redacted. The New York Times and other major news organizations cited that reason in a statement that condemned the document dump. They had collaborated with WikiLeaks in the past.

Those are some of the day’s major stories.