You've heard the story a gazillion times from your conservative friends or relatives: Fannie Mae (i.e., code for the Big Bad Federal Government) and its mortgage loan practices (i.e., giving mortgages to those lazy, shiftless people with non-white skin tones - John Boehner and his spray tan aficionados excluded, of course) caused the housing market to collapse and the ensuing financial crisis that for some strange reason we keep calling the "Great Recession." Big Banks were just innocent bystanders (not) helpless to defeat the Big Guvmint villains at Fannie Mae and Freddie Mac. The purveyors of cow manure on the right are still spreading this story. Some even claim it was all your fault, Mr. and Ms. America.
And yet, if that is true, why did the Bank of America just agree to pay Fannie Mae $12 BILLION ($11.65 Billion to be precise, but allow me to round up) to make claims against BOA for fraud in the sale of "toxic subprime mortgages" by Countrywide to Fannie Mae go away? How in the world did the Right Wing's favorite whipping boy (or is it girl?) manage to force Bank of America to slink away with its tail between its legs, rather than face a trial on claims that any conservative tea party loving winger would reflexively tell you were bogus? Good question, since that is exactly what just happened:
Fannie Mae argued that [BOA] had sold it toxic home-loan debts between 2000 and 2008. [...]
The agreement brings to an end a long-running dispute between Fannie Mae and Bank of America.
"A favourable resolution of this long-standing dispute between Fannie Mae and Bank of America is in the best interest of taxpayers," said Bradley Lerman at Fannie Mae. [...]
Bank of America said the settlements were "a significant step in resolving our remaining legacy mortgage issues".
In October, the US government sued the bank for alleged mortgage fraud, accusing subsidiary Countrywide Financial of selling thousands of toxic home loans to Fannie Mae and the government's second mortgage agency Freddie Mac.
Earlier in the month, it took similar action against the banks Wells Fargo and JP Morgan Chase.
Looks like BOA cut and ran, rather than press the argument that their subsidiary "knew nothing, nothing" about the fraud perpetrated on Fannie Mae. No doubt they got off light. Yet BOA's executuves can walk away claiming they and their predecessors at Countrywide did nothing wrong. It should be noted that BOA previously settled similar claims with Fannie Mae and its sister corporation, Freddie Mac for pennies on the dollar back in January 2011, a deal that was roundly criticized at the time as being far too generous:
In this week’s settlement, BofA agreed to pay $1.28 billion to Freddie Mac for claims involving $127 billion in loans made through 2008 by Countrywide Financial, which BofA acquired that year. The bank agreed to pay $1.52 billion to Fannie Mae. [...]
Those criticizing BofA’s settlement, which has been described as a “gift” and a “backdoor bailout,” included California Rep. Maxine Waters (D-L.A.).
“I’m concerned that the settlement between Fannie Mae, Freddie Mac and Bank of America over misrepresentations in the mortgages BofA originated may amount to a backdoor bailout that props up the bank at the expense of taxpayers,” Waters said in a statement Jan 4. “Given the strong repurchase rights built into Fannie Mae and Freddie Mac’s contracts with banks, and the recent court setback for Bank of America in similar litigation with a private insurer, I’m fearful that this settlement may have been both premature and a giveaway.”
Considering that US taxpayers (i.e., your Federal Government) have spent roughly $140 BILLION since 2008 propping up Fannie Mae and Freddie Mac, I'd say BOA got off with a wrist slap. But then again, considering how much money the Federal Reserve and the Treasury have shoveled the Big Banks' way since 2008, that should come as no surprise. For just one example, look at the Center for Public Integrity's 2009 report on funds given to BOA and other Big Banks and Mortgage Companies (including Wells Fargo, JP Morgan Stanley, etc.) under the HAMP program, supposedly to fix the mess these great and grand financial institutions created:
Firms that fed off the subprime lending frenzy that devastated the banking system are lining up to collect more than $21 billion in taxpayer funds meant to help bail out borrowers now in trouble on their loans.
The funds come from the federal government’s Home Affordable Modification Program (HAMP), begun in February by the Obama administration to coax lenders into modifying mortgages that might otherwise result in foreclosure. According to a Center for Public Integrity analysis of public records, of the 25 top participants in the program, at least 21 were heavily involved in the subprime lending industry. Most specialized in servicing subprime loans, but several both serviced and originated the loans.
When you add in the TARP bailout, and the Big Banks continuing
access to money under-the-radar bailout by the Federal Reserve, what's a few billion dollars in fines, etc. to settle the securities fraud claims of Fannie Mae and Freddie Mac? Peanuts, my friends. Peanuts. No seriously:
A report just released by the US Government Accountability Office explains how the Federal Reserve divvied up more than $4 trillion in low-interest loans after the fiscal crisis of 2008, and the news shouldn’t be all that surprising.
When the Federal Reserve looked towards bailing out some of the biggest banks in the country, more than one dozen of the financial institutions that benefited from the Fed’s Hail Mary were members of the central bank’s own board, reports the GAO. At least 18 current and former directors of the Fed’s regional branches saw to it that their own banks were awarded loans with often next-to-no interest by the country’s central bank during the height of the financial crisis that crippled the American economy and spurred rampant unemployment and home foreclosures for those unable to receive assistance.
Although the crisis continues to have an effect on Americans that were devastated by the recession, the banks that survived the near meltdown were largely able to do so because some of their CEOs sat on the same Federal Reserve board the decided on how to dish out trillions of dollars. [...]
n a press release published on the official US Senate website for Mr. Sanders, the lawmakers singles out JPMorgan Chase CEO Jamie Dimon over an alleged conflict of interest that could have contributed to the bailout his bank received through the Fed. Sanders also calls out General Electric CEO Jefferey Immelt for sitting on the same Federal Reserve board that approved massive funding to GE during a time of financial insecurity in the United States.
How much government money have BOA and other Banksters vaccuumed out of the Federal Reserve or "graciously accepted" from the Federal Government? At least SEVEN TRILLION DOLLARS, my friends, as of 14 months ago. And what are these "job creators" doing with all that essentially free cash? Not creating jobs.
No, as this rec list diary points out they are speculating in commodities, such as copper and, in the near future, likely essential food crops, and oil. These same banks are freezing out home buyers in many regions of the country by using their massive profits and federal handouts to speculate in residential real estate.
I certainly understand how all this money being dumped into the Big Bank's ever expanding maw is helping out some Americans - those who work for Wall Street, that is. I fail to understand how it's doing much for the rest of us. But hey, Bank of America is going to pay Fannie Mae twelve billion dollars.
Can I hear a Hallelujah, Brothers and Sisters?