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Excerpt: "The US is suing the Bank of America for investor fraud over the sale of $850m worth of residential mortgage-backed securities."

File photo, Bank of America building. (photo: AP)
File photo, Bank of America building. (photo: AP)


Government Sues Bank of America Over Fraud

By Reuters

08 August 13

 

Bank accused of fraud over $850m worth of securities based on mortgages that authorities say were riskier than stated

he US is suing the Bank of America for investor fraud over the sale of $850mworth of residential mortgage-backed securities.

The lawsuits are the latest legal headache for the second-largest US bank, which has already agreed to pay in excess of $45bn to settle disputes stemming from the 2008 financial crisis.

While most of the cases Bank of America has already confronted pertain to its acquisitions of brokerage Merrill Lynch and home lender Countrywide, the two civil lawsuits filed on Tuesday pertain to mortgages the government said were originated, securitised and sold by Bank of America's legacy businesses.

The residential mortgage-backed securities at issue, known as RMBS, were of a higher credit quality than subprime mortgage bonds and dated to about January 2008, the government said, months after many Wall Street banks first reported billions of dollars in writedowns on their holdings of subprime mortgage securities.

The justice department and the US Securities and Exchange Commission filed parallel lawsuits in US district court in Charlotte, North Carolina, accusing Bank of America of making misleading statements and failing to disclose important facts about the pool of mortgages underlying a sale of securities to investors in early 2008.

The investors included the Federal Home Loan Bank of San Francisco and Wachovia Bank National Association, the justice department lawsuit said.

Bank of America, which is based in Charlotte, responded to the lawsuits with a statement: "These were prime mortgages sold to sophisticated investors who had ample access to the underlying data and we will demonstrate that.

"The loans in this pool performed better than loans with similar characteristics originated and securitised at the same time by other financial institutions. We are not responsible for the housing market collapse that caused mortgage loans to default at unprecedented rates and these securities to lose value as a result."

Bank of America shares fell 1.1% to close at $14.64 on the New York Stock Exchange following news of the lawsuits. Bank of America had warned in a securities filing on Thursday about possible new civil charges linked to a sale of one or two mortgage bonds.

According to the lawsuits Bank of America made misleading statements and failed to disclose important facts about the mortgages underlying a securitisation named BOAMS 2008-A. More than 40% of the 1,191 mortgages in the securitisation did not comply with the bank's underwriting standards, according to the complaint.

"These misstatements and omissions concerned the quality and safety of the mortgages collateralising the BOAMS 2008-A securitisation, how it originated those mortgages and the likelihood that the 'prime' loans would perform as expected," the justice department said in its statement.

In 2011 Bank of America's shares fell more than 20% in a single day after American International Group filed a $10bn lawsuit accusing the bank of mortgage fraud. Weeks later Warren Buffett's Berkshire Hathaway Inc swooped in with a $5bn investment to shore up confidence in the bank. Since then Bank of America's stock has more than doubled as the bank has announced agreements to settle major disputes and investors have regained confidence in its outlook.

Among major deals the company agreed to an $8.5bn settlement with mortgage-backed securities investors, a $1.6bn settlement with bond insurer MBIA Inc and a settlement worth more than $10bn with Fannie Mae , the government-controlled mortgage finance provider.

The US attorney general, Eric Holder, said on Tuesday that Barack Obama's Financial Fraud Enforcement Task Force, which brought the latest lawsuit against Bank of America, "will continue to take an aggressive approach to combatting financial fraud and uncovering abuses in the residential mortgage-backed securities market" and was pursuing "a range of additional investigations".

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+25 # dkonstruction 2013-08-07 14:21
Big fucking deal. it's just a cost of doing business (and given the record profits for the industry as a whole not even a particularly large cost at that). Meanwhile, BoA and the other banksters have gotten away with foreclosing on 4 million people and displacing approximately 10 million (roughly the size of the state of Michigan).

Add to these banksters other organized criminal ventures i.e., manipulating energy markets, manipulating libor etc. and these guys should be convicted of financial crimes against humanity and using the RICO statutes have their assets seized and their businesses shut down (like the gov't does with other mob operations). And, while I don't believe in the death penalty since corporations are now people they should be subject to the death penalty and their CEO and boards should be executed on live national television (now there's a reality TV show i'd actually watch)...bet there would be a lot less of this kind of activity after that by these folks.

But please, enough of trying to make it look like the Obama administration is actually doing anything to stop (or even reign in) the activities of this organized criminal industry.
 
 
+2 # HowardMH 2013-08-08 08:33
Dkonstruction, you have so nailed it.

Wall Street is Worried. Can’t imagine why.

Just look at the three stooges. Obama the Wimp, Holder the puppet of the Wimp, and Justice Thomas the mute who hasn’t said anything intelligent on the supreme court in many, many years. You can also add to the list the former Republican Congressman in Florida, Allen West who is a threat to the gene pool and it took him a month to figure out that he lost the election in 2012. What about the hearings on how bad Wall Street is screwing everyone???? Clinton put over 1000 Wall Street Crooks in jail, Bush put 1300 and Obama the Wimp and put Zero, “0”, nada, none, no one in jail!

Wall Street, Wall Street, Wall Street. It is all just smoke and mirrors. Until there are thousands of really, really pissed off people on Capital Hill (all at the same time – with base ball bats, or 2 x 2s) raising some serious hell against the Lunatics, and idiots absolutely nothing is ever, ever going to happen to these totally bought and paid for by the richest 50 people in the world that are becoming more and more powerful with each passing rigged election thanks to the stupid people.

How much success have you had with the TOTALLY NON VIOLENT protests over the last few years?

I’m no fan of Sarah’s but this comment is just so appropriate. So how is that Hopei, Changie working out for you now?
 
 
+3 # dkonstruction 2013-08-08 11:53
[quote name="HowardMH" ]... Until there are thousands of really, really pissed off people on Capital Hill raising some serious hell...nothing is ever, ever going to happen.

How much success have you had with the TOTALLY NON VIOLENT protests over the last few years?quote]

HowardMH, I agree with much of what you wrote, but think it's important to remember that violence/non-vi olence) is are tactics not strategies. And,given the sheer fire power of the national security state we need to understand that self-defense is one thing but violent initiative is quite another (as Malcolm X e.g., understood quite clearly).

As for protests (violent or otherwise), they too have their place but in many ways they have become a substitute for building alternative institutions that develop real political (as well as economic)power.

So, as far as the banks are concerned, I believe we need to support and actively build what I see as the beginnings of a "public bank" movement in this country.

The "demand" is simple: public monies i.e., tax dollars and pension funds of public employees (in NYC for example the assets of the public employee pension funds are over $100 billion....thin k what "we" could do with $100 billion if invested for "the people" and "public purposes") should be deposited into publicly-owned and controlled banks and used for "public purposes".

Then the banksters can do whatever the fuck they want with "their" money (not "ours") and we won't have to give a shit.
 
 
+5 # NanFan 2013-08-08 08:44
What a joke! Hang the bunch from their money belts. Or let them rot in prison for all the wrong doing against the American people!

N.
 
 
+22 # cmp 2013-08-07 15:35
The hypocrisy of "too big to fail" is that these Financial Monopolies had already failed the American and the Global Citizens 60 years ago, shortly after Bretton Woods.

The real "Fraud" is, that they still haven't been broken up..
 
 
+7 # soularddave 2013-08-08 00:05
Government actions, like fining banks million$, reminds me of "protection rackets". The little guys (banks) are constantly reminded of just who the bigger gangster is.
 
 
+16 # AreYouMadEnoughYet 2013-08-08 01:45
The real fraud is the failure to do one damn thing for the homeowners in this financial scam and the ongoing BS lawsuits in favor of the 'investors' who bought the paper. Screw them all. The whole thing is a damn lie and the millions of families who have paid the price and been made out to be the 'deadbeats' in this greatest heist of American and global properties of the people transferred into the hands of the wealthy and greedy is beyond sickening. Let the whole damn thing come crashing down. Don't be afraid of global financial collapse - welcome it - bring it on - let it finally come. They and we deserve it for letting them steal the entire world from us for no damn good reason other than they could and we let them.

Michael Hudson is right: the tyranny of unrelenting debt will destroy it all and they are too damn stupid (and greedy) to stop themselves. Let it all come crashing down. Grow a garden. Learn to take care of yourself. They have nothing you need, and when they fall we will all be better off.
 
 
+2 # HowardMH 2013-08-08 08:42
AreYouMadEnough tYet you are singing my song - bring it on. It is not that they are too damn stupid it is the 300 Million Americans are to damn stupid to do anything about it.

Limit Fannie and Freddie's loans and just let the banks handle everything. No problem, the banks going to love that. The banks ONLY take 10% (you get that 10%) of the loan value as risk and (You and your tax paying suckers) get to pick up the other 90% on all defaults. You pissed off yet?

With Obama the Wimp’s latest speech in AZ where was all the talk about holding the banks accountable for the major screw job they did to all of American, and putting these banker crooks in jail. Did I miss that part of his campaign speech? Also, why couldn't he have said the same speech while on Capital Hill the other day instead of pissing away $500,000 on a trip to AZ. Oh yes he would have had to say it with people that are responsible for doing something about it right there. Couldn't possibly do that, Obama the Wimp needs to be standing in front of a few hundred screaming supporters before he could say anything like that.

Obama the Wimp.
Obama the Wimp.
 
 
+9 # RMDC 2013-08-08 07:37
I wonder how many billions of dollars BoA has received in US government bailouts? So in reality, it will be US taxpayers who pay the $850 if there is ever a conviction and if BoA ever pays.

Why not indicements against individuals who ran BoA. You can put a human in jail, but you can't put a corporation in jail.
 
 
+2 # HowardMH 2013-08-08 08:49
Why RMDC, Why. Just come back here in a week and see how many have approved the comments already posted or made their own comments -- and there is your answer - most don't care, or give a shit what the banks do and the government knows it so why are they going to upset their gravy train to re-election donation.
 
 
+6 # MainStreetMentor 2013-08-08 07:54
Without Congressional check and balance legislative regulations containing teeth, these lawsuits will probably be meaningless, and will have no effect whatsoever if "settlements of fines" are dished out instead of jail time. At least we'll be able to hear facts and discover their criminal methodologies.
 
 
+2 # CoyoteMan50 2013-08-08 12:11
Bank of America will get off with a slap on the wrists after screwing me and thousands of others out of their Retirement funds.
No trial is necessary just toss them all in jail.
 
 
+2 # JJMK3 2013-08-08 15:19
Our retirement funds are "GONE TO CHASE-MANHATTEN " We need help; punishing the Crooks DOES NOTHING FOR US SMALL FOLK!
 
 
0 # JSRaleigh 2013-08-10 11:02
Oh the delicious irony!

No criminal charges will ever be filed against those who defrauded investors & shareholders. When these CIVIL lawsuits are finally settled, those same investors & shareholders who were defrauded will be stuck with the bill a second time.
 

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