Tragically named Bank of America will be back in court following a lawsuit brought by federal prosecutors.
From the New York Times:
On Wednesday, federal prosecutors in New York took aim at Bank of America. They accused it of carrying out a scheme, started by its Countrywide Financial unit, that defrauded government-backed mortgage agencies by churning out loans at a rapid pace without proper controls. In a civil suit, prosecutors seek to collect at least $1 billion in penalties from the bank as compensation for the behavior that they say forced taxpayers to guarantee billions in bad loans.
$1 billion is not a lot of money for Bank of America who already repaid the $45 billion TARP loan. But one revelation from the suit contradicts one of BofA’s talking points – namely that Countrywide are the real villains and BofA is being victimized due to a poor acquisition done during a crisis.
In the lawsuit on Wednesday, the Justice Department attacked a home loan program known as the “hustle,” which the bank inherited from Countrywide in 2008 and kept alive through 2009.
Prosecutors say the venture was a symbol of Wall Street’s slipshod standards during the mortgage bubble. According to the lawsuit, Countrywide rubber-stamped mortgage loans to risky borrowers and passed them on to Fannie Mae and Freddie Mac, the two government-controlled mortgage financial giants that guaranteed the loans. The two entities were ultimately stuck with heavy losses and a glut of foreclosed properties.
“The fraudulent conduct alleged in today’s complaint was spectacularly brazen in scope,” Preet Bharara, the United States attorney in Manhattan, said in a statement.
Brazen works. Especially as Wall Street through surrogates in Congress has tried to shift blame squarely on Freddie and Fannie, institutions it was committing fraud against according to the filings.
Occupy Wall Street before it Occupies You.