Security Pacific Wins Loan Case: In a...

Security Pacific Wins Loan Case: In a victory for the banking industry, a federal judge in New York ruled that loans sold by banks are not securities and are not subject to the anti-fraud or disclosure laws covering stocks and bonds. U.S. District Judge Milton Pollack ruled in a widely watched case that Security Pacific National Bank was not liable for losses investors suffered because of loan defaults by the now bankrupt Integrated Resources Inc. Banks often make loans and then sell pieces of them to other investors, spreading the risk among a bigger group of lenders. The question the court considered was whether the loan was a security, such as a stock or bond, and thus subject to disclosure rules so that investors know the risk the investment entails.