The U.S. Department of Justice brought a civil fraud lawsuit for more than $1 billion against Bank of America Wednesday afternoon. It’s the first lawsuit of its kind to be brought against one of the big mortgage financiers — Bank of America bought Countrywide Financial, a mortgage giant that sold thousands of toxic loans to Freddie Mac and Fannie Mae, in July 2008, one month before the financial collapse.
“The fraudulent conduct alleged in today’s complaint was spectacularly brazen in scope,” the prosecuting attorney, Preet Bharara, said in a statement yesterday afternoon.
“As alleged, through a program aptly named ‘the Hustle,’ Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill. As alleged, Countrywide and Bank of America systematically removed every check in favor of its own balance — they cast aside underwriters, eliminated quality controls, incentivized unqualified personnel to cut corners, and concealed the resulting defects.”
The lawsuit also says that the “Hustle” (or “HSSL,” for “High-Speed Swim Lane”) program continued through 2009, long after Bank of America purchased Countrywide.
ProPublica reports that the government bailout of Fannie and Freddie — required in part because of mortgages Fannie and Freddie purchased from Countrywide and packaged into securities — has cost American taxpayers $187.5 billion. The former special investigator general in charge of oversight of the Troubled Asset Relief Program (TARP) bailout, Neil Barofsky, will be on Moyers & Company this weekend.