Feds' Failure To Criminally Prosecute Big Banksters Continues As DOJ, SEC File More Civil Suits Targeting BofA
The Washington Post reports:
- Traders at Bank of America willfully misled investors about the quality of the residential mortgages tucked into the securities the bank sold at the start of the financial crisis, according to separate lawsuits filed Tuesday by the Justice Department and the Securities and Exchange
The charges are the latest reckoning for the nation’s second-largest bank, which has been plagued by a series of lawsuits stemming from the housing crisis. The bank has been accused of discriminating against mortgage applicants, saddling the government with billions of dollars in troubled loans and a range of foreclosure abuses.
Now Bank of America faces civil charges for allegedly hiding the risks associated with $850 million worth of securities backed by home loans. Justice claims the bank knew that more than 40 percent of the 1,191 mortgages it bundled into securities did not meet underwriting guidelines and sold them anyway. Prosecutors estimate that the total losses sustained by investors will exceed $100 million.
“Bank of America’s reckless and fraudulent origination and securitization practices in the lead-up to the financial crisis caused significant losses to investors,” said Anne Tompkins, the U.S. attorney for the Western District of North Carolina who is in charge of the case. “Now, Bank of America will have to face the consequences of its actions.”
The Justice lawsuit came out of the Obama administration’s federal mortgage task force, a team of federal and state attorneys assembled in 2009 to hold Wall Street accountable for fraud and other misconduct rooted in the financial crisis. The SEC’s case is based on the same collection of securities that underpins the claims in the Justice lawsuit.
Federal prosecutors said the exact amount of civil penalties will be determined as the litigation proceeds.
Bank of America said in a corporate filing last week that it expected federal prosecutors and regulators to take action. On Tuesday, the bank defended the quality of the securities in question and insisted that investors had ample access to the underlying data on the loans.
“These were prime mortgages sold to sophisticated investors,” Bank of America spokesman Lawrence Grayson said. “The loans in this pool performed better than loans with similar characteristics originated and securitized at the same time by other financial institutions.”
Grayson added: “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.”
In the aftermath of the financial crisis, Bank of America has contended with a barrage of lawsuits over mortgage securities and residential foreclosures.
The bank’s acquisition of mortgage giant Countrywide Financial in 2009 gave it an edge in the housing market and endless legal headaches. Analysts estimate that Bank of America has lost nearly $40 billion on mortgage litigation and repurchases of soured loans linked to Countrywide.
Tuesday’s lawsuits, however, are tied to Bank of America’s own mortgage operations. Prosecutors say the bank made its employees churn out mortgages, placing quantity over quality to reap profits. One bank employee told prosecutors that “her superiors pressured her to process applications as quickly as possible but to keep her opinions to herself,” according to the complaint.
In spite of the continued pursuit of banks accused of misconduct, critics say federal prosecutors and regulators are not being as aggressive as the law allows.
“No matter how intentional the fraud and how much damage it does, the DOJ refuses to prosecute the elite banks and bankers,” said William Black, an associate professor of economics and law at the University of Missouri-Kansas City. “The conduct they describe was not reckless — it was intentional.”
There seems to be no end in sight for the legal fallout from the financial crisis. Hours before announcing its case against Bank of America, the SEC said it reached a $50 million settlement with UBS over complex mortgage bonds. Regulators say the Swiss banking giant misled investors about the quality of collateralized debt obligations created in 2007 that caused $130 million in losses.
For the Justice Department's & SEC's press releases, see: