Some new drama in the housing crisis. Now that the taxpayers have been robbed bailed out the banks to cover wild gambling bets and lost most of their wealth in the process; the FIRE sector is fighting with each other for some free lunches.
"The New York Federal Reserve Bank is part of a consortium of eight large institutional investment firms that is demanding that Bank of America repurchase loans included in mortgage securities." The New York Fed, PIMCO, BlackRock and others are trying to force Bank of America to buy back $47 billion in mortgage bonds.
The case boils down to the claim that Bank of America misrepresented the value of the bonds to the buyers. These firms apparently are shocked that, to paraphrase Billy Madison, Bank of America "called the sh*t, poop!"
"There were representations made to my bond holders when they purchased these securities. They are contractual representations about the credit quality of these mortgages...and my clients are concerned," Kathy Patrick [lead attorney for the bond holders] added, "that the mortgages in question did not, at the time they were securitized, conform to those representations."
The entire system of securitized mortgage debt was crap; from what it was/is as an instrument, how it was rated by Moody's and S&P and how it was structured with collateral debt obligations (not to mention synthetic CDOs).
Everyone participated understanding the scam hoping to find a bigger dumbass but since the doomsday machine collapsed before they could, its time to go to court. And in another fun twist Bank of America owns 34% of BlackRock, so any payments made will ultimately slosh back to Bank of America.
So while the housing market continues to burn FIRE is busy roasting the spoils. It's unknown what the judge will say to the lawyers but I have a suggestion.