On Wednesday, the U.S. Department of Justice filed a civil lawsuit against Bank of America and its Countrywide Financial department, a bank knee-deep in the sub-prime mortgage fiasco. The government’s lawsuit totals $1 billion. It’s been five years since the housing market collapse, exposing the shady financial dealings of banks and insurance companies, but it’s better late than never for some legal action.
The lawsuit is part of a broader action that began earlier this month when New York Attorney General Eric Schneiderman sued JPMorgan Chase & Co. over defective mortgage loans and mortgage-backed securities. Since it’s civil, the punishment will only be financial, and will not result in any jail time for the various bankers involved.
According to the Justice Department’s complaint, which was filed in Manhattan federal court, in 2007 Countrywide devised a financial scheme they called the “Hustle.” The goal? Approve shitty mortgages at a fast clip, regardless if home owners could realistically meet the mortgage payments. The scheme continued through 2009.
To add insult to injury, Countrywide apparently hid the defective loans (which were 9x the national average) from Fannie Mae and Freddie Mac, and awarded bonuses to staff who would “rebut” problems when they were discovered.
“The fraudulent conduct alleged in yesterday’s complaint was spectacularly brazen,” U.S. Attorney Preet Bharara in Manhattan said in a statement. “Through a program aptly named ‘the Hustle,’ Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill.”
Touche. And glad to hear the government talk tough and back it up with a lawsuit.
“Bank of America has stepped up and acted responsibly to resolve legacy mortgage matters,” Larry DiRita, a spokesman for the Charlotte, North Carolina-based company, said in an e-mailed statement. “The claim that we have failed to repurchase loans from Fannie Mae is simply false. At some point, Bank of America can’t be expected to compensate every entity that claims losses that actually were caused by the economic downturn.”
Right. Bank of America doesn’t seem to understand that it only has itself to blame for its problems. As do other various banks, whether they are being sued or not. They could have acted responsibly in mortgage lending, but they didn’t. And their irresponsibility and greed triggered the Great Recession.
Nobody weeps for them.