Just minutes ago, the news broke that Bank of America is being sued for $1 Billion by the United States Attorney General’s office in Manhattan for allegedly engaging in a scheme intending to defraud Fannie Mae and Freddie Mac. The suit is over actions taken by Countrywide Financial Corp., the notorious sub-prime lender sold thousands of defective loans to the now-beleaguered GSEs.
This move follows a trend we noted on our blog last week: Bank of America joins JP Morgan Chase, Wells Fargo and Morgan Stanley on the list of financial institutions that are being taken to task for their role in perpetrating total meltdown in the housing market.
This news comes after yesterday’s surprising announcement that Barney Frank does not support Attorney General Eric Schneiderman’s case against JP Morgan Chase. The Democratic representative from Massachusetts and architect of the Dodd-Frank financial regulation legislation said in a statement:
The decision now to prosecute J.P. Morgan Chase because of activities undertaken by Bear Stearns before the takeover unfortunately fits the description of allowing no good deed to go unpunished.
We tend to take a slightly cynical view of major party politics and politicians but I have to say we are surprised at Rep. Frank’s statement. The idea that this major financial institution (or any other) deserves special treatment from Washington is exactly the kind of thinking that leads to an unregulated Wall Street and perpetuates inequality in the United States. We happen to believe, based on the experience of the past five years, that an unfettered Wall Street contributes to a risky economic climate that puts low income homeowners in danger.
While we understand Barney Frank’s point, we believe that Bear Stearns and Countrywide should be sued for their criminal actions that helped bring on the financial crisis. While it is regrettable that it is JP Morgan Chase and Bank of America will have to answer the charges rather than the past corporate leaders of Bear Stearns and Countrywide, a corporate takeover should not be a get out of jail free card that denies the citizens of New York State and the American people their day in court for these criminal actions.