Read

User menu

Search form

Breaking: Federal Prosecutors Sue Bank of America Over Mortgage Program

Breaking: Federal Prosecutors Sue Bank of America Over Mortgage Program
Wed, 10/24/2012 - by Ben Protess
This article originally appeared on The New York Times

Federal prosecutors in New York sued Bank of America on Wednesday, accusing it of carrying out a mortgage scheme that defrauded the government during the depths of the financial crisis.

In a civil complaint that seeks to collect $1 billion from the bank, the Justice Department took aim at a home loan program known as the "hustle," a venture that has become emblematic of the risk-fueled mortgage bubble. The complaint adds to a flurry of federal and private lawsuits facing Bank of America's beleaguered mortgage business.

Bank of America inherited the "hustle" home loan program with its purchase of Countrywide Financial in 2008. Prosecutors say the effort, kept alive by Bank of America through 2009, was intended to churn out mortgages at a rapid pace without proper checks on wrongdoing. The bank then sold the "defective" loans without warning to Fannie Mae and Freddie Mac, the government-controlled housing giants, which were 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. Mr. Bharara brought the case with the inspector general of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, and the government watchdog for the bank bailout program.

A spokesman for Bank of America did not immediately return a request for comment.

The case is one piece of a broader federal crackdown on Wall Street, a last-ditch effort to hold firms accountable for perceived misdeeds that fueled the mortgage crisis. In the wake of the crisis, authorities were blamed for the dearth of charges facing financial executives at the center of the crisis.

For all the grumbling about few criminal prosecutions, the government has now mounted dozens of civil cases against the nation's biggest financial firms, leaving the financial industry to battle a chaotic and somewhat redundant web of litigation. Mr. Bharara sued Wells Fargo this month over questionable mortgage deals. President Obama also formed a federal mortgage task force, which recently filed its first case against JPMorgan Chase over mortgage deals created by Bear Stearns, the defunct firm that JPMorgan bought during the crisis.

The case announced on Wednesday is the latest legal headache for Bank of America stemming from its acquisition spree during the crisis. The bank, which has come to define the excesses that nearly toppled the financial industry in 2008, struck a $2.4 billion deal in September to settle a securities class-action lawsuit that it misled investors about the takeover of Merrill Lynch.

The Countrywide deal has fared far worse. Billions of dollars in soured loans from the subprime lending specialist wreaked havoc on Bank of American's balance sheet. Securities regulators have also extracted nearly $70 million in fines from Countrywide's former chief executive, Angelo R. Mozilo.

The lawsuit filed Wednesday threatens to impose steep fines on the bank. The Justice Department filed the case under the False Claims Act, which could provide for triple the damages suffered by Fannie and Freddie, a penalty that could reach more than $3 billion.

The case also overlaps with a number of actions that government agencies are pursuing against Wall Street banks. It builds on, for example, the Federal Housing Finance Agency's decision last year to sue 17 big banks over losses sustained by Fannie Mae and Freddie Mac. The twin mortgage companies, bailed out by taxpayers in 2008, continue to push firms like Bank of America to repurchase billions of dollars in bad loans.

3 WAYS TO SHOW YOUR SUPPORT

ONE-TIME DONATION

Just use the simple form below to make a single direct donation.

DONATE NOW

MONTHLY DONATION

Be a sustaining sponsor. Give a reacurring monthly donation at any level.

GET SOME MERCH!

Now you can wear your support too! From T-Shirts to tote bags.

SHOP TODAY

Sign Up

Article Tabs

Thanks to the Electoral College, leftists have perhaps the final say this November over whether democracy can hold on for at least another four years, or if fascism will take root and infect all facets of the federal government for decades to come.

What remains unknown is whether post-truth Republicans will succeed in 2024 as the Nazis did in 1933.

Based on details that have emerged about Trump’s presidential agenda, the far-right Heritage Foundation plans for the next GOP president to have all the tools necessary to demolish multicultural democracy and establish a white, Christian ethnostate that imposes a gender apartheid not unlike the Taliban’s Afghanistan.

Donald Trump, Hitler

Like Hitler, Trump has a unique command of propaganda, a captivating public presence, and he knows how to drive home narratives beneficial to him and harmful to his enemies.

Trump’s brand of hyper-nationalism combined with the intense consolidation of executive power follows the same playbook as fascistic leaders in other countries like India,Russia, Hungary, Turkey, Egypt, Italy and Argentina, among others.

Thanks to the Electoral College, leftists have perhaps the final say this November over whether democracy can hold on for at least another four years, or if fascism will take root and infect all facets of the federal government for decades to come.

History shows there are no “one-day” dictatorships. When democracies fall, they typically fall completely.

What remains unknown is whether post-truth Republicans will succeed in 2024 as the Nazis did in 1933.

Based on details that have emerged about Trump’s presidential agenda, the far-right Heritage Foundation plans for the next GOP president to have all the tools necessary to demolish multicultural democracy and establish a white, Christian ethnostate that imposes a gender apartheid not unlike the Taliban’s Afghanistan.

Donald Trump, Hitler

Like Hitler, Trump has a unique command of propaganda, a captivating public presence, and he knows how to drive home narratives beneficial to him and harmful to his enemies.

Based on details that have emerged about Trump’s presidential agenda, the far-right Heritage Foundation plans for the next GOP president to have all the tools necessary to demolish multicultural democracy and establish a white, Christian ethnostate that imposes a gender apartheid not unlike the Taliban’s Afghanistan.

Posted 1 month 2 weeks ago

Thanks to the Electoral College, leftists have perhaps the final say this November over whether democracy can hold on for at least another four years, or if fascism will take root and infect all facets of the federal government for decades to come.

Posted 6 days 19 hours ago

What remains unknown is whether post-truth Republicans will succeed in 2024 as the Nazis did in 1933.

Posted 1 month 18 hours ago

History shows there are no “one-day” dictatorships. When democracies fall, they typically fall completely.

Posted 1 week 1 day ago