On first blush, it doesn't seem possible that one can overstate the relevance of $196 billion in bank lawsuits, but that's just what the plaintiff is saying has happened.  The Federal Housing Finance Authority, which filed lawsuits against 17 of the world's largest banks, is complaining that the media coverage of its lawsuit extravaganza is "excessive."  An FHFA official added that the agency was simply doing its job - as required by law - to minimize taxpayer losses on Fannie Mae and Freddie Mac. While arguments will continue over whether or not FHFA should have sued 17 banks in the first place, the FHFA does have a point in that many initial reports of the lawsuit's damages were incorrect.  Yes, it's true the FHFA is suing to recover some $196bn from banks related to mortgage-backed securities that Freddie and Fannie purchased.  But that figure isn't close what the lawsuits will eventually cost the banks - i.e., the banks' exposure is much less. In its suits, the FHFA is demanding "full rescission" of private-label mortgage securities - i.e., the banks that originally securitized mortgages and sold the securities to Fannie and Freddie would have to fully repurchase the remaining securities balances, as well as reimburse for interest and cover legal and other costs.  Additionally, the FHFA has requested punitive damages from eight of the 17 banks involved in the suit. But, at the end of the day, as it relates to the securities themselves, the banks will be holding assets (i.e., the securities) that have significant value - even if they are backed by subprime mortgages.  And while banks would certainly incur losses by selling any of these securities, such losses would be nowhere near $196bn. There is another element in this equation, though, which is a negative for the banks.  When, and if, they repurchase the securities, they would have to mark down all of those assets which, in turn, would lower their capital ratios.   [TheStreet. 9/6/11]